Summary

Restructuring Plans (“Plan(s)”) were introduced by the Corporate Insolvency and Governance Act 2020 (“CIGA”) as a rescue tool for companies in financial difficulty to compromise debt and other liabilities owed to secured and unsecured creditors and its members, with the court’s sanction.

Temporary provisions restricting action to wind up companies and reverse some winding up orders already made are a step closer following presentation of the Corporate Insolvency and Governance Bill (“Bill”) to the House of Commons on 20 May. The Bill will now work its way through both Houses before imminently becoming law. The Bill includes a number of substantial corporate insolvency changes, but also temporary provisions restricting action to wind up companies in light of Covid-19, on which we focus here.

The Inner House of the Court of Session has found that, where a business had no realistic prospect of continuing in existence, it was not appropriate to assess whether a property was sold at an undervalue by reference to a forced sale valuation.

The Court’s judgment serves as a valuable reminder of some fundamental principles of insolvency law.

The facts

The Court of Session has confirmed that the administration in Scotland of a Scottish company will take priority over an Indian liquidation of the same company, regardless of where the company’s business and assets are situated. The Court has also confirmed that the validity and enforceability outside the UK of a floating charge is irrelevant to the validity of an administrator’s appointment in Scotland under that floating charge.

The Supreme Court has held that, where a company had been the victim of wrong-doing by its directors, the directors’ wrong-doing could not be attributed to the company to prevent it (or its liquidators) from bringing claims against the directors.