With commercial property companies’ debt burdens reaching pre-2008 levels and warnings being issued this month by the European Central Bank, in this article we outline some of the key issues to be considered and steps which may be taken by BVI real estate holding companies to protect their position in the face of rising financing costs and other inflationary pressures.

Inflationary pressures and increasing interest rates are expected to continue to have a negative impact on the global economy during 2023. In this article we consider restructuring options under BVI law available to companies in or approaching financial difficulties, when a BVI company will be considered to be insolvent, the duties of directors of financially distressed or insolvent BVI companies and practical steps and considerations for directors where a BVI company may be approaching insolvency.

Restructuring Options and Creditor Arrangements

This week the Court of Appeal has heard the long awaited appeal in Jervis and another v Pillar Denton Limited (Game Station) and others, better known as the Game Station case, which (depending on the outcome) may trigger a drastic change to the way in which rent in administration is treated.

In the recent decision of Topland Portfolio No.1 Limited v Smiths News Trading Limited [2014] EWCA Civ 18, the Court of Appeal has given a timely reminder of the need for landlords to tread carefully when dealing with leases to ensure that a tenant guarantee remains effective.

In the event of a tenant becoming insolvent, it is clearly important for a landlord to know where rent payable ranks in administration. A recent landmark decision handed down by the High Court strengthens the position of landlords by deciding that rent can now be more widely payable as an expense of the administrator.

Background

Simply, if rent is ranked as an expense of the administration1 then it is almost always discharged in full as a mandatory expense of the administrator, rather than being placed with lower priority creditors.