Today, new legislation comes into force* that provides directors of companies in financial difficulty with a second breathing space from the financial impact of the wrongful trading provisions.

An unfortunate but inevitable consequence of the economic downturn induced by COVID-19 is that an increasing number of construction companies will enter into insolvency. In Bresco Electrical Services Ltd (in liquidation) v. Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25, the Supreme Court has provided some respite to contractors in liquidation by finally confirming their unfettered right to refer construction disputes for resolution by adjudication.

The Corporate Insolvency and Governance Act 2020 introduces a temporary, retrospective suspension of the directors' personal financial liability for wrongful trading from 1 March 2020 until 30 September 2020. This is not a blanket defence to a breach of duty by directors, since the directors' general duties to act in the best interests of the company (or, on insolvency, its creditors),will continue to apply.

On 26 June the long-awaited Corporate Insolvency and Governance Act 2020 came into force and introduced emergency measures to provide protection to directors of companies which continue to trade notwithstanding the threat of insolvency, and to prevent, where possible, companies entering into insolvency due to COVID-19.

On 26 June, the long-awaited Corporate Insolvency and Governance Act 2020 became law providing the UK (but with separate provisions for Northern Ireland) with temporary and permanent changes to insolvency law aimed at helping businesses manage the economic implications of COVID-19 including:

Permanent measures

On 20 May, Parliament had its first reading of the Bill, a detailed document containing all the expected provisions applying across England, Wales and Scotland, and with separate (but substantially similar) provisions for Northern Ireland.

MPs will next consider all stages of the Bill on 3 June 2020 and it is anticipated that this will be fast-tracked to become law in July.

On 28 March 2020 the UK government announced that emergency measures will be implemented to provide protection to directors of companies which continue to trade notwithstanding the threat of insolvency, and to prevent, where possible, companies entering into insolvency due to COVID-19.

The proposed measures are as follows:

Our private credit clients are preparing for the next restructuring cycle and have called us about ultrafast bankruptcy cases. These chapter 11 cases have grabbed headlines because they lasted less than a day. Specifically, FullBeauty Brands and Sungard Availability Services emerged from bankruptcy in 24 hours and 19 hours, respectively. Is this a trend and which companies are best suited to zip through chapter 11?

A. Prepacks, Pre-Negotiated Cases, and Free-Falls

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

The Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) require each corporate party in an adversary proceeding (i.e., a bankruptcy court suit) to file a statement identifying the holders of “10% or more” of the party’s equity interests. Fed. R. Bankr. P. 7007.1(a). Bankruptcy Judge Martin Glenn, relying on another local Bankruptcy Rule (Bankr. S.D.N.Y. R.