It’s now level pegging for HMRC on cram down – twice it has been crammed down, and twice it has not.

In the most recent restructuring plan proposed by Prezzo, the court sanctioned the company’s restructuring plan and crammed down HMRC as both preferential and unsecured creditor. Unlike Houst’s restructuring plan, where HMRC was also crammed down, HMRC fiercely contested the plan proposed by Prezzo.

In the case of Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340, the Honourable Madam Justice Linda Chan recognized and provided assistance to a mainland China appointed administrator over a mainland China company in liquidation despite the administrator's application being outside the scope of the insolvency cooperation mechanism between Hong Kong and mainland China courts. The Hong Kong court affirmed that its jurisdiction to recognize and assist office-holders appointed by a court of another jurisdiction derives from common law.

Snapshot

The Restructuring Plan (Plan) was introduced as part of the UK Corporate Insolvency and Governance Act 2020, which introduced a new part 26A into the Companies Act 2006 (CA 2006). The part 26A Plan provisions are largely based on the existing scheme of arrangement rules detailed under part 26 of the CA 2006, and it is often referred to as the “super scheme”.

Plans now sit alongside schemes of arrangement and company voluntary arrangements (CVAs) to provide a further restructuring option for companies and insolvency practitioners alike.

The first half of 2023 witnessed the failure of three financial institutions in quick succession—Silicon Valley Bank (March 10, 2023), Signature Bank (March 12, 2023), and First Republic Bank (May 1, 2023). This was the first time three financial institutions failed in such a compressed time period since the Great Recession of 2008.

The increase in bankruptcy filings that restructuring professionals have been expecting is now arriving. With rising inflation, increased interest rates, tightening credit markets, labor shortages and supply chain disruptions, we are starting to see a dramatic increase in filings. Last week the American Bankruptcy Institute noted that commercial Chapter 11 filings increased 105% in May 2023 as compared to May 2022 and across the board filings are on the rise as well.

In this quick guide we focus on working capital and consider ways a business can seek to preserve all important liquidity through challenging and unpredictable periods. Supply chain issues, the battle against inflationary price hikes and other external stressors mean businesses globally are being challenged. What can senior management do in order to manage and mitigate risk to a company's financial health and stay away from the edge?

Practical Tips

Managing the financial health of a business to ensure it continues to be viable and successful can be challenging, particularly in today’s economic environment.

June 2023

Contents

In two recent blog posts we discussed the challenge made to the Company Voluntary Arrangement (CVA) of Mizen Build/Design Ltd (the “Company”) by Peabody Construction Limited (“Peabody”) and the finding of (i) a material irregularity based on failure to disclose information to creditors in the CVA proposal, and (ii) unfair prejudice based on vote swamping.

On May 8, 2023, online cryptocurrency exchange platform Bittrex, Inc. and three of its affiliated entities (collectively “Bittrex”) filed for chapter 11 to wind down their U.S. and long-dormant Malta operations. The bankruptcy filing followed costly regulatory investigations and an April 17, 2023 SEC enforcement action alleging that Bittrex improperly sold crypto assets that were securities. Unlike other crypto bankruptcies, Bittrex did not risk, hypothecate, or loan cryptocurrencies needed to meet its contractual obligations to its customers.

With increased stress in global, domestic, and regional economies, the number of Australian businesses at risk of bankruptcy is approaching a three-year high.