It is difficult to predict what 2023 might hold for businesses in the UK. Given the difficult economic environment, many will already be facing a challenging start to the year. Although the challenges of the pandemic (such as lock downs) have gone, others have materialised. Energy price hikes and inflation rises continue to make trading conditions tough.

This guide should not be relied on as a definitive guide to the legislation and should not be relied on as legal advice. The particular circumstances of any situation will need to be considered to determine if the overseas entity is one that is captured by the legislation, if the estate is a qualifying estate, and whether the beneficial owners need to be registered. As a result, this guide is intended only as a high-level overview.

This guide covers the position of property and land situated in England and Wales only. 

The European distressed market has been quiet this year. This is a function of ongoing government support, supportive sponsors and lenders, and a huge amount of liquidity in the market. Many companies which we and our clients identified as potential restructuring candidates have managed to complete successful refinancing transactions and have avoided the restructuring negotiation table.

The UK Government has announced today that temporary measures to protect businesses in distress introduced in response to the Covid-19 pandemic through the Corporate Insolvency and Governance Act 2020 will be lifted from 1 October 2021.

New measures intended to protect small businesses as the economy reopens, particularly in the retail, hospitality and leisure sectors, are to be introduced, with effect until 31 March 2022.

In June 2020, the Corporate Insolvency and Governance Act (the “CIGA”) introduced a new procedure to the restructuring toolkit in England & Wales, the Part 26A restructuring plan (the “Plan”, see further detail on CIGA in our article here). The Plan is similar to the well-tested English law scheme of arrangement (the “Scheme”), and the English courts have so far relied on the wealth of Scheme case law to guide them in deciding whether to sanction a Plan.

I had an interesting conversation this week with the Evening Standard, considering the prospect of further company voluntary arrangements, or 'CVAs' on the UK high street as the year progresses.

The vast majority of ‘bricks and mortar’ retailers, as well as hospitality venues, are desperately seeking ways to cut their fixed costs to improve their chances of riding-out the pandemic. Leasehold obligations are often among the most significant of those fixed costs, and the CVA offers a well-tested route to compromise those obligations.

The UK Government has today announced plans to introduce new legislation which will require mandatory independent scrutiny of 'pre-pack' administration sales, where connected parties, such as the insolvent company's existing directors or shareholders, are involved in the transaction.

Although the Sunbird scheme of arrangement was approved by the relevant creditors, sanction was refused by Mr. Justice Snowdon, who highlighted:

• a ‘paucity of information provided by the company as part of the scheme process’, and
• a failure to engage with creditors ‘whom the directors clearly felt were irrelevant or would be an obstacle to their plans’.

He remarked that the company’s approach 'fell a considerable distance short of what was required for a fair process'.

Despite commentators’ recent focus on the new Part 26A restructuring plan, introduced in late June by the Corporate Insolvency and Governance Act 2020, the scheme of arrangement under Part 26 of the Companies Act 2006 (“scheme”) remains a popular tool for companies to reach a compromise or arrangement with their creditors and/or its members.

New Look's unsecured creditors today approved a company voluntary arrangement that will amend 402 store leases to a turnover rent model, reflecting recent movements in the market towards more flexible lease obligations.

Despite opposition from many landlords, and considerable disquiet in the property industry, it is clear that tenants remain open to using the CVA process to restructure their leases, as a means to address the impact of the COVID-19 pandemic.