Recent months have brought unprecedented challenges to businesses, with no sector immune to the economic repercussions of the pandemic. Yet despite headline news of certain high-profile restructurings and insolvencies, such as Virgin Atlantic, Debenhams, and Edinburgh Woollen Mill, it seems the emergency measures implemented by the UK Government have, to a degree, staved off wide spread economic collapse that may otherwise have been inevitable.

The Corporate Insolvency and Governance Act received royal assent on 25 June 2020 and comes into force immediately.

The Act introduces a range of new corporate restructuring tools and suspends, temporarily, parts of the existing insolvency regime. The purpose of this note is to update you on two key aspects of the Act: the moratorium on legal action and the temporary changes in relation to statutory demands and winding-up petitions.

Moratorium on legal action

Re Joint Provisional Liquidators of Moody Technology Holdings Ltd [2020] HKCFI 416

The Hong Kong Court has explained why there is no inconsistency between: (a) its domestic insolvency law which does not permit the appointment of provisional liquidators purely for the purposes of restructuring the company; and (b) common law recognition of foreign "soft-touch" provisional liquidators.

What is a soft-touch provisional liquidator?

Introduction

The immediate focus for Britain’s authorities when dealing with the COVID-19 pandemic has been, quite rightly, to secure the best possible health outcome for the greatest number of people.

Subsequently, following a wave of concern regarding the best way of maintaining the financial status-quo for (i) businesses, (ii) employees, and (iii) individuals, the UK government announced an unprecedented series of assistance programmes, designed to counter the impact of previously unknown, and unquantifiable, distress.

Introduction

Clearly there are some major economic challenges ahead.

Many businesses may be able to withstand the challenges ahead but it may very well be that their trading counterparties (whether suppliers, customers or other stakeholders) will not. Whilst these times can represent an opportunity for some, such as potential acquirers (whether of businesses, assets or distressed debt), in most cases, the climate represents a threat to businesses.