Company Voluntary Arrangements (CVAs) are an insolvency procedure established under the Insolvency Act 1986 which allow a struggling company to reach a compromise on debts due with a sufficient majority of creditors, thereby avoiding a formal insolvency. They have primarily been used only by large high street retailers and are not often considered, particularly in Scotland, a realistic option for small and medium companies (SMEs).

In the face of the COVID-19 pandemic and with a new model available, we believe it is time for a rethink.

This case is within the Chestnut Portfolio acquired by the Cerberus global private investment group and has been one of its most hard fought cases, involving personal debts and security of over £12m and litigation spanning back to 2016.

Summary

It seems to be a common misunderstanding, even among lawyers who are not bankruptcy lawyers, that litigation in federal bankruptcy court consists largely or even exclusively of disputes about the avoidance of transactions as preferential or fraudulent, the allowance of claims and the confirmation of plans of reorganization. However, with a jurisdictional reach that encompasses “all civil proceedings . . .

With two of the UK's biggest cinema chains announcing, within days of each other, significant curbs to their operations due to COVID-19's continued impact on the entertainment sector, our restructuring and insolvency team have looked at the particular challenges faced by these venues and some of the steps their operators and funders should consider to help keep the curtains open.

THE IMPORTANCE OF THE UK'S ENTERTAINMENT INDUSTRY

I don’t know if Congress foresaw, when it enacted new Subchapter V of Chapter 11 of the Code[1] in the Small Business Reorganization Act of 2019 (“SBRA”), that debtors in pending cases would seek to convert or redesignate their cases as Subchapter V cases when SBRA became effective on February 19, 2020, but it was foreseeable.

Our February 26 post [1] reported on the first case dealing with the question whether a debtor in a pending Chapter 11 case may redesignate it as a case under Subchapter V, [2] the new subchapter of Chapter 11 adopted by the Small Business Reorganization Act of 2019 (“SBRA”), which became effective on February 19.

The Act outlines certain insolvency law reforms in response to the COVID-19 crisis, including a temporary suspension of wrongful trading provisions for company directors. The suspension applies retrospectively from 1 March 2020 until 30 September 2020, and aims to encourage directors to continue to trade during the pandemic.

This change will not affect the directors’ duties regime. Directors must continue to comply with their duties, in particular those owed to the company's creditors where the company is, or is likely to be, insolvent.

Our February 26 post entitled “SBRA Springs to Life”^[1] reported on the first case known to me that dealt with the issue whether a debtor in a pending Chapter 11 case should be permitted to amend its petition to designate it as a case under Subchapter V,^[2] the new subchapter of Chapter 11 adopted by

On 28 March 2020, the Government proposed certain insolvency law reforms in response to the COVID-19 crisis, including a temporary suspension of wrongful trading provisions for company directors.

The measures are intended to apply retrospectively from 1 March 2020 for three months, and aim to encourage directors to continue to trade during the pandemic.

State governments can be creditors of individuals, businesses and institutions that are debtors in bankruptcy in a variety of ways, most notably as tax and fine collectors but also as lenders. They can also be debtors of debtors, in their role, for example, as the purchasers of vast quantities of goods and services on credit. And they can also be transferees of a debtor’s property in (at least) every role in which they can be creditors.