A government press release issued on 23 April 2020 will be welcomed by commercial tenants up and down the country, particularly those in the retail and leisure industries, but it will not make such welcome reading for landlords.

In the current climate many commercial tenants are having a difficult time and consequently so too are landlords. The government has urged landlords and investors to work collaboratively with high street businesses which have found themselves unable to pay their rent during the COVID-19 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

GENERAL INSOLVENCY LANDSCAPE IN GERMANY PRE-COVID-19

Without undue delay upon occurrence of illiquidity or overindebtedness, at the latest within three weeks, members of the representing body of a legal entity have to apply for the opening of insolvency proceedings over the assets of such entity

INSOLVENCY REASONS:

CORONAVIRUS RESPONSE – INTRODUCING FLEXIBILITY TO DIRECTORS' DUTIES?

IN LIGHT OF COVID-19, THE UK GOVERNMENT RECENTLY ANNOUNCED ITS INTENTION TO TEMPORARILY SUSPEND THE OFFENCE OF WRONGFUL TRADING BY DIRECTORS OF UK COMPANIES. THIS WILL INEVITABLY HAVE A WIDE-RANGING EFFECT ON BOTH DIRECTORS AND CREDITORS.

Despite what seemed like three months ago to be something only happening a very long way away, and would hopefully dissipate as quickly as it started, the Coronavirus pandemic has well and truly arrived on our shores.

Daily news reports are revealing the far-reaching effects of the outbreak, the likes of which have not been seen for generations. In what form, and to what extent, the health, financial and social implications will be in the aftermath of the pandemic remain an unknown quantity for us all.

Last week, the Government announced a number of measures to provide financial support to businesses struggling with the impact of COVID-19, including two new Government-backed funding schemes.

Addleshaw Goddard is monitoring those measures closely, with our latest updates found here.

Notwithstanding, it is inevitable that we will see more companies collapse over the coming months, as they struggle to cope with the indefinite business disruption.

Systems Building Services Group Ltd, Re [2020] EWHC 54 (Ch)

Liquidation is not a panacea for the relevance and application of directors' duties. A practical example of which involves a director of a company in insolvency procuring and agreeing to an off-market sale of a property to himself by a rogue IP at a price which he knew to be a significant undervalue.

Four months on from our inaugural newsletter – and where do we start??

Theresa out, Boris in; champagne super overs at Lords; hottest bank holiday on record; largest ever peacetime repatriation (of holidaymakers); Parliament unlawfully prorogued; Brexit on hold (again); and a general election two weeks before Christmas. It’s been anything but dull.

The team have been equally as active in the same period, having seen a significant influx of new work. Amongst the main highlights were:

The recently published Pension Schemes Bill provides for major extensions of the Pensions Regulator's powers, including the creation of new criminal offences which are very broad in scope and could potentially catch a wide range of people. Whilst the Bill is not set to become law this side of the general election, it seems likely that a future government will seek to enact the measures contained in the Bill, many of which are likely to command cross-party support.