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.

In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.

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:

The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”

In a recent decision arising out of the Republic Airways bankruptcy, Judge Sean Lane of the United States Bankruptcy Court for the Southern District of New York held that the liquidated damages provisions of certain aircraft leases were improper penalties and, thus, “unenforceable as against public policy” under Article 2A the New York Uniform Commercial Code. In re Republic Airways Holdings Inc., 2019 WL 630336 (Bankr. S.D.N.Y. Feb. 14, 2019).