1. State of the Restructuring Market
1.1 Market Trends and Changes
State of the Restructuring and Insolvency Market
There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).
Fewer Insolvencies for More Opportunities
At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:
On 24 February 2021, the UK government laid The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 before Parliament.
These draft regulations introduce (among other items) new restrictions on “pre-pack” disposals to connected persons and are seemingly a policy response to growing criticism around the inequity of pre-pack sales.
Despite the ongoing global pandemic, opportunities for stressed and distressed investments have not been as prolific as many expected. The window for entry into credits opened and closed more quickly than imagined. Nevertheless there have been several high-profile restructurings using the English scheme of arrangement. Of course, some of these were already in motion prior to the onset of the pandemic. A handful of these have sought to test the recently enacted insolvency regime, whilst others have tested more established legislative principles.
The enacted Corporate Insolvency and Governance Act (the Act) introduces three permanent reforms to the existing insolvency legislation and certain temporary measures designed to address the immediate impact of COVID-19 on UK businesses. Among other things, the Act looks to maximise the potential for struggling companies to be maintained as a going concern. As market participants and the courts get to grips with the new legislation, it is clear that there will be some impact on the special situations landscape and the business of stressed and distressed investment.
Permanent Reforms
Moratorium: a new stand-alone moratorium to provide businesses with an initial 20-business-day stay from creditor action.
The High Court of Hong Kong refused to allow a Chapter 11 Trustee to disclose a Decision from Hong Kong winding up proceedings in the US bankruptcy court. The US proceedings were commenced to prevent a creditor from taking action following a breach of undertakings given to the Hong Kong court in circumstances where the company had no jurisdictional connection with the US.
Following our previous article, the Court of Appeal dismissed an appeal following the High Court deciding that a moratorium in relation to restructuring proceedings in Azerbaijan could not be extended in breach of the Gibbs rule, allowing two significant creditors to proceed with their claims in the English Courts.
Despite the debtor's contention that his primary residence was in the United States, the Court held that it had jurisdiction to make a Bankruptcy Order following a petition presented by HMRC.
HMRC presented a bankruptcy petition against Robert Stayton on 30 May 2014 who owed approximately £653,640. The matter came before the court on a number of occasions before the final hearing, with judgment being handed down in November 2018.
A discharged Bankrupt had intentionally misled the Court as to his COMI being in England and Wales in order to obtain a Bankruptcy Order. Four years after the making of the Bankruptcy Order, the Court annulled it on the grounds that the Court did not have jurisdiction to make the Order in the first place.