Landlords might be starting to feel a little uneasy given the news that Superdry is considering a Company Voluntary Arrangement (CVA). Superdry is reportedly working with accountants to hash out a plan that will likely involve shutting down certain stores and cutting rent liabilities. The accountants instructed will be exploring whether either a CVA or a Restructuring Plan - both of which are processes which allow businesses to seek to reduce their liabilities to creditors – would be appropriate.
What exactly is a CVA?
Once a tenant becomes insolvent a landlord's recovery options become more limited but there are important steps a landlord should be taking.
1. Check the terms of any rent deposit agreement
Check the terms of the arrangement to find out how the deposit is held and when it is available for to use. In some cases, such as when a tenant has entered into a creditors' voluntary agreement, consent from the court may be required before the deposit can be used.
2. Find out the tenant's status
Do landlords do get a good deal in CVAs? It would seem they do (if you don't read the small print…)
A few weeks ago we blogged that we were expecting RSM's research report, which was commissioned by the Insolvency Service, into the impact of CVAs on the landlords. The specific question in the research paper was: "are landlords equitably treated, compared to other creditors in large business CVAs?".
One difficulty encountered by creditors and trustees in bankruptcy is the use of one or more aliases by a bankrupt. Whether it is an innocent use of a nickname or an attempt to conceal one's identity, the use of an alias can often create problems for creditors seeking to pursue debts and for trustees seeking to recover assets held by a bankrupt.
How does it happen?
'Chapter 11 bankruptcy', the US insolvency regime, often features in the UK headlines. When Lehman Brothers filed under Chapter 11 in 2008, it marked the start of the global financial crisis. Chapter 11 (which refers to part of the US Bankruptcy Code) is a restructuring tool designed to rescue companies. Its closest UK counterpart is Administration, under Schedule B1 to the Insolvency Act 1986.
The UK Government has announced new laws to enhance the scrutiny and transparency of pre-pack administrations.
What are pre-pack administrations?
A pre-pack administration is when the sale of a distressed company and its assets is negotiated before, or shortly after, the appointment of administrators.
As concerns about illegal phoenix activity continue to mount, it is worth remembering that the Corporations Act gives liquidators and provisional liquidators a powerful remedy to search and seize property or books of the company if it appears to the Court that the conduct of the liquidation is being prevented or delayed.
When a person is declared a bankrupt, certain liberties are taken away from that person. One restriction includes a prohibition against travelling overseas unless the approval has been given by the bankrupt's trustee in bankruptcy. This issue was recently considered by the Federal Court in Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2) [2020] FCA 792, which involved the Federal Court's review of the trustee's initial refusal of an application by a bankrupt, Mr Moltoni, to travel to and reside in the United Kingdom.
The Corporate Insolvency and Governance Bill was finally introduced to Parliament on 20 May. It is now clear that the provisions of the Bill relating to statutory demands and winding up petitions will apply to Scotland without the need for the Scottish Government to pass further legislation.
Statutory demands
What makes a contract an unprofitable contract which can be disclaimed by a trustee in bankruptcy without the leave of the Court under section 133(5A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)? Can a litigation funding agreement be considered an unprofitable contract when the agreement provides for a significant funder's premium or charge of 80% (85% in the case of an appeal)?