Key insolvency provisions: a practical guide to what has changed and why

TEMPORARY PROVISIONS

1. SUSPENSION OF WRONGFUL TRADING PROVISIONS

What's changed?

This brief article considers the currently active restructuring markets in Asia and provides examples of where insolvency procedures from outside of Asia come to the rescue or, depending on your side of the table, torment, those trying to implement an orderly restructuring.

Introduction

Included in this update: Corporate Insolvency and Governance Bill introduced to Parliament; FRC updates guidance on corporate governance and reporting and more...

Corporate Insolvency and Governance Bill introduced to Parliament

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.

Further relief for Myanmar hotels - exemption on licence fees and deferment of land lease payments

The hotel and tourism sector in Myanmar and across the globe has been severely affected by the COVID-19 pandemic. Since 19 March 2020, Myanmar has closed all land borders with its neighbouring countries and from 31 March 2020 to 15 May 2020, all international commercial passenger flights are banned from landing in Myanmar. As a result, the occupancy in many hotels is currently running low (some in single digits) and certain hotels have temporarily ceased operations.

From 6 April 2020, all non-UK resident corporate landlords (NRLs) are within the charge to UK corporation tax on the income from their UK property rental business (PRB) and on capital gains from direct or indirect disposals of UK real estate. This marks a significant change for NRLs, which were previously subject to UK income tax on their PRB income and (until 6 April 2019) exempt from UK tax on their capital gains.

It has been reported that Debenhams which entered administration earlier this month for the second time will be managed as a 'light touch' administration.

In this article we look at what this actually means and whether 'light touch' administration could be a useful tool for both businesses and insolvency practitioners looking to negotiate a route through the coronavirus pandemic.

On 28 March 2020, the Government proposed certain insolvency law reforms in response to the COVID-19 crisis, including a temporary suspension of wrongful trading provisions for company directors.

The measures are intended to apply retrospectively from 1 March 2020 for three months, and aim to encourage directors to continue to trade during the pandemic.

This is the second litigation involving the furlough scheme in the insolvency context, following on from Re Carluccio's (in administration). Please refer to our note on Carluccio's for background reading on how the furlough scheme weaves into insolvency law.

Issue

In the first litigation involving the Furlough scheme, the court in Re Carluccio's (in administration) ruled on how the administrators can lawfully give effect to furlough arrangements with the employees who have agreed to the variation of their employment contract.

Read on for our analysis of the case which gives an interesting insight into how the courts in the future might interpret the furlough scheme.

1. Background

Carluccio’s in administration