The High Court dismissed landlords’ challenges to the terms of New Look’s company voluntary arrangement (CVA) last week in a ruling that has sparked lively debate within both the landlord and restructuring sectors.
The landlords challenged the CVA by way of three main limbs:
The Covid-19 pandemic has been with us now for over 12 months. At the time of writing, we are part way through the third national lockdown. The Government has indicated that schools should start reopening on 8 March 2021, but there is no indication of when non-essential retail will reopen or when the directive to work from home ‘where possible’ will be eased.
Following yesterday’s announcement that a number of the temporary measures brought in by the Corporate Insolvency and Governance Act (CIGA) to ease pressures on companies most at risk of insolvency during the ongoing Covid-19 crisis are to be extended, we look here at some of the key questions arising under CIGA in the context of the commercial landlord and tenant relationship.
The Government has already taken steps to prevent landlords of commercial premises in England and Wales from forfeiting leases for arrears of rent. This restriction presently lasts until 30 June 2020, but may be extended.
Impact on payment of rent
Rent due was not forgiven and landlords were still able to take various enforcement steps to recover rent, including the use of insolvency proceedings.
The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.
U.S. Bankruptcy Judge Dennis Montali recently ruled in the Chapter 11 case of Pacific Gas & Electric (“PG&E”) that the Federal Energy Regulatory Commission (“FERC”) has no jurisdiction to interfere with the ability of a bankrupt power utility company to reject power purchase agreements (“PPAs”).
The Supreme Court this week resolved a long-standing open issue regarding the treatment of trademark license rights in bankruptcy proceedings. The Court ruled in favor of Mission Products, a licensee under a trademark license agreement that had been rejected in the chapter 11 case of Tempnology, the debtor-licensor, determining that the rejection constituted a breach of the agreement but did not rescind it.
Few issues in bankruptcy create as much contention as disputes regarding the right of setoff. This was recently highlighted by a decision in the chapter 11 case of Orexigen Therapeutics in the District of Delaware.
Once I have a contract it is binding unless the other side goes bust – right?
One party to a contract cannot unilaterally change the deal – right?
If a commercial tenant does not pay its rent the landlord can forfeit – right?
As landlords have found to their cost this year, the answer is that a CVA can challenge all of these assumptions.
The judicial power of the United States is vested in courts created under Article III of the Constitution. However, Congress created the current bankruptcy court system over 40 years ago pursuant to Article I of the Constitution rather than under Article III.