The UK government introduced the Corporate Insolvency and Governance Bill (CIGB) to Parliament on 20 May 2020. As well as including temporary measures to help support businesses affected by COVID-19, it proposes significant permanent changes to UK insolvency law. These proposed permanent changes include a new company moratorium: a mechanism to give a company in financial difficulty a temporary breathing space against creditor action, during which the directors remain in control, but overseen by a monitor.
In a comprehensive judgment published on 23 April 2020, the Cayman Islands Court of Appeal, comprising Moses JA, Martin JA and Rix JA, has provided welcome clarification of the interplay between a contractual agreement to arbitrate disputes arising between shareholders and the exclusive jurisdiction of the Court to determine whether a company should be wound up on the just and equitable ground.
The Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding-up petition, pursuant to Section 99 of the Companies Law (2020 Revision).
The Cayman Islands Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding up petition, pursuant to section 99 of the Companies Law (2020 Revision) (the "Companies Law").
The Legal Issue of Principle
Domestic Procedures
What are the principal insolvency procedures for companies in your jurisdiction? | Liquidation: voluntary and official. Cayman does not have an equivalent to the English concept of the company administration or to the Chapter 11 process in the United States. Schemes of Arrangement/“Soft Touch Liquidations” allow the company to enter into an agreement with its shareholders and/or creditors. |
The Court of Justice of the European Union (CJEU) has given a preliminary ruling on when a security holder has "possession or…control" of financial collateral for the purposes of Directive 2002/47 on financial collateral arrangements. From an English law perspective, this is particularly relevant for anyone considering whether a floating charge over financial collateral qualifies as a security financial collateral arrangement (or SFCA).
Background – UK implementation and interpretation
The insolvency of the borrower is a standard event of default in facility agreements. As well as covering the borrower's cash flow insolvency, these clauses also often cover other, earlier signs of distress. Two recent cases have seen lenders try to exploit these outer reaches of their insolvency event of default clauses. Hayley Çapani and Adam Pierce explain why these cases are significant for parties negotiating new deals, and for lenders considering their enforcement options on existing deals.
Negotiations with creditors for rescheduling
In Re JT Frith Limited [2012] EWHC 196 (Ch):
- the terms of an intercreditor agreement; and
- some unwitting help from the junior creditors,
enabled a senior secured lender to benefit indirectly from the prescribed part on the insolvency of its debtor.
Existing law at a glance
The Enterprise Act 2002 introduced the prescribed part under a new section 176A(2) of the Insolvency Act 1986. It reserves part of the floating charge recoveries for unsecured creditors.
Since then, the courts have held that: