Reforms to the Corporate Restructuring and INsolvency Framework
Moratorium
The Bill introduces a moratorium for companies during which they will benefit from a ‘payment holiday’ in respect of certain pre-moratorium debts and protection from legal action and security enforcement without the court’s permission.
Following a number of corporate governance failures in situations of insolvency, the Government has published a consultation paper (located here) aimed at cracking down on directors and employers behaving irresponsibly.
Article Summary:
In Wright (and another) (as joint liquidators of SHB Realisations Ltd (formerly BHS Ltd) (in liquidation)) v Prudential Assurance Company Ltd, the court held that, when the BHS CVA terminated, the landlord was entitled to claim the full rent due under its lease. With more recent retail CVAs seeking to push the envelope even further, is the continued compromise of landlord creditors post-CVA the next issue to be tested in the courts?
Summary: Following a number of corporate governance failures, the Government has published a consultation paper aimed at cracking down on directors and employers behaving irresponsibly. “These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions.” Greg Clark. Responses are required by 11 June 2018.
Sale of Businesses in Distress
Summary: In Wright (and another) (as joint liquidators of SHB Realisations Ltd (formerly BHS Ltd) (in liquidation)) v Prudential Assurance Company Ltd, the court held that, when the BHS CVA terminated, the landlord was entitled to claim the full rent due under its lease. With more recent CVAs seeking to push the envelope even further, is the continued compromise of landlord creditors post-CVA the next issue to be tested in the courts?
Pre-pack administrations are becoming more common. Four Holdings' purchase of Agent Provocateur illustrates the attraction of pre-packs — the ability to cherry-pick the best assets, acquire the goodwill of a well-known business that continues to trade, and retain its key staff without having to take on liabilities to creditors —and why existing management is likely to be supportive.
The English High Court in Lehman Brothers International (Europe) (In Administration) [2016] EWHC 2417 (Ch), in one of a series of cases arising from the Lehman insolvency, has had to consider (among other issues) the meaning of “Default Rate” under the ISDA Master Agreement.
Editor’s Note: Our good London colleague Ed Marlow recently published this as a Bryan Cave client advisory.
Including an unsecured creditor in an agreed payments waterfall does not by itself confer on that unsecured creditor the benefit of a mortgagee’s usual duties on enforcement of security, or a direct claim against the sale proceeds.
The English High Court in Fondazione Enasarco v Lehman Brothers Finance S.A. and Anthracite Rated Investments (Cayman) Limited [2015] EWHC 1307 (Ch) applied a common sense approach in the circumstances to the determination of Loss under the 1992 ISDA Master Agreement. The judgment of the judge (Mr Justice David Richards) is useful reading for those involved in structured products and derivatives.
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