This Quickguide outlines some practical considerations for companies whose contractual counterparties are experiencing financial distress, including what questions may be asked of the counterparty in relation to its distress and how to negotiate payment terms or recover debts.
1. Overview
The Government intends to enhance the UK's cross-border insolvency regime with the adoption of the UNCITRAL Model Law on Enterprise Group Insolvency (MLEG) and, after further consideration, Article X of the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (MLIJ).
Government concludes that the permanent Corporate Insolvency and Governance Act 2020 measures have been "broadly welcomed", although possible refinements identified A 'Post-Implementation Review' carried out by the Insolvency Service has concluded that the restructuring plan, the standalone moratorium, and the suspension of contractual termination (ipso facto) measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA) have all been broadly welcomed by stakeholders and are seen as positive additions to the UK's insolvency and restructuring framework. The review
An interim government report has concluded that the restructuring plan, the standalone moratorium, and the restriction on contractual termination (ipso facto) measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA) satisfy their policy objectives. The report is part of the statutory review which must be carried out within three years of the measures coming into force.
In a dramatic reversal of restructuring plan fortunes, HRMC recently successfully challenged two independent mid-market Part 26A Companies Act 2006 restructuring plans: the Nasmyth Group Limited Restructuring Plan (the Nasmyth RP) and the Great Annual Savings Company Ltd Restructuring Plan (the GAS RP). To date, only one other restructuring plan has been refused sanction.
This Quickguide explains the two most common forms to bring a solvent company's life to an end and explains the processes involved in each, as well as in which circumstance which option may be best suited.
Strike-off or members' voluntary liquidation?
When a company has fulfilled its economic purpose or a group of companies wishes to consolidate its structure, there are two main options available to bring a solvent company to an end:
German real estate group restructuring plan sanctioned in London
Having failed to get its restructuring solution through in its home jurisdiction, beleaguered German real estate group, Adler, turned to London. After substituting a UK plc as issuer of six series of notes in order to propose an English restructuring plan, and in the face of fierce opposition from an ad hoc committee of 2029 noteholders (AHG), the group successfully forced the plan through just in time.
The Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 has brought much needed clarity to the legal basis and scope of the so-called ‘reflective loss’ principle. The effect of the decision is a ‘bright line’ rule that bars claims by shareholders for loss in value of their shares arising as a consequence of the company having suffered loss, in respect of which the company has a cause of action against the same wrong-doer.
A recent decision of the High Court of New Zealand provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.
On 30 March 2020, the board of directors of EncoreFX (NZ) Limited resolved to appoint administrators to the company. By then, New Zealand was already at Level 4 on the four-level alert system for COVID-19.
The UK Court of Appeal has held that legal privilege outlasts the dissolution of a company in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600.
Legal advice privilege applies to communications between a client and its lawyers. The general rule is that those communications cannot be disclosed to third parties unless and until the client waives the privilege.