This summer’s landmark Supreme Court decision in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in Liquidation) [2020] UKSC 25 (“Bresco”) would have doubtless been interesting news for Insolvency Practitioners (“IPs”) engaged in the construction sector.
Following its decision in July to consider restructuring options in light of its mounting debts, the popular restaurant chain Pizza Hut has reached an agreement with its creditors by way of a company voluntary arrangement (CVA) that will see 215 of its 244 restaurants (88%) continue trading, as well as retaining around 5,000 of its 5,450 employees (92%).
With two of the UK's biggest cinema chains announcing, within days of each other, significant curbs to their operations due to COVID-19's continued impact on the entertainment sector, our restructuring and insolvency team have looked at the particular challenges faced by these venues and some of the steps their operators and funders should consider to help keep the curtains open.
THE IMPORTANCE OF THE UK'S ENTERTAINMENT INDUSTRY
Two directors from the UK were disqualified for 12 years each after they used funds from existing clients to payback previous clients. The directors' company entered into loan agreements with existing clients worth around £9.1 million for forex trades, in return for interest and loan repayments. The Insolvency Service later discovered that at least £8.4 million was used to make interest and loan repayments to previous clients.
Included in this update: Government extends temporary COVID-19 measures in CIGA 2020 and more...
COVID-19
CIGA 2020 extensions in force
Along with tightening social controls, the months ahead will be defined by various critical relationships and the rules that govern them. Of course they all interlock: material change in any of them impacts each of the others. Which causes multiple complexities in decision-making and risk assessment processes, both within a business and when looking at critical suppliers and customers:
Landlords and Tenants:
The Corporate Insolvency and Governance Act 2020 came into force on 26 June 2020 introducing a number of temporary and more permanent reforms, summarised in my colleague Jess’ post here.
Following the recent Supreme Court decision in Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd, it is clear that companies in liquidation have the right to adjudicate a dispute. However, a successful adjudication is only half the battle: the insolvent company must still persuade the court to enforce the decision.
The Corporate Insolvency and Governance Act came into force on 26 June 2020 introducing a number of reforms aimed at providing protection to companies in financial distress, particularly as a result of the COVID19 pandemic.
However, the reforms present a number of potential problems to suppliers. Specifically, a permanent provision has been added to the Insolvency Act 1986 which:
THE LANDLORD'S POSITION' TO CVAs v PRE-PACKS
There has been much press coverage in recent years on Tenant CVAs and the tempo on these has increased in recent weeks with the approval of CVAs for New Look, Pizza Express and Yo Sushi! amongst others.