The first case to consider the requirement of a monitor to terminate a moratorium if they think a company is unable to pay certain debts was heard by the High Court on 4 February 2021. The case provides further clarity on the UK standalone moratorium process and is an example of a moratorium being used in order to restrain secured creditor action.
During the course of the pandemic we have seen an unprecedented level of government assistance aiming to aid businesses struggling with the effects of the pandemic. This has resulted in consistently low insolvency levels. This year we will see the lifting of certain of the restrictions and the end to some of the support initiatives that have been in place. We have outlined some of the key changes and what might be in store for 2022.
Victoria's Court of Appeal has reaffirmed the risk that a disclaimer of property may be set aside where the liquidators are indemnified, and the need for liquidators to be mindful where the company holds contaminated property.
The UK Government has published a Consultation1 which sets out its proposals for targeted (but significant) amendments to certain aspects of the existing UK insolvency arrangements for insurers.
The English High Court has sanctioned the restructuring plans proposed by the Virgin Active group following a hearing contested by a group of the gym chain's landlords. The decision represents the first use of the restructuring plan procedure, introduced during the summer of 2020, to restructure a lease portfolio, demonstrating the utility of the tool for debtors when implementing a significant restructuring across the capital structure, and as an alternative to the much-used company voluntary arrangement.
Introduction
Introduction – the framework
Liquidators need to be mindful that a disclaimer of property may be challenged. The Supreme Court of Victoria underscored a key issue in establishing "prejudice" to creditors in a liquidation, holding that a disclaimer of property may be set aside where the liquidators are indemnified.
The Corporate Insolvency and Governance Act 2020 (“CIGA“) ushered in a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). The legislation governing the Restructuring Plan sits alongside that for schemes of arrangement and is included in a new Part 26A to the Companies Act 2006.
The Restructuring Plan does not apply to companies that are solvent with no risk of insolvency; rather it only applies to companies where two conditions have been satisfied:
The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.
That's straightforward enough for a liquidator, right?
Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.