UPDATE ON TEMPORARY PROVISIONS

COVID PROTECTIONS EXTENDED TO GIVE BUSINESSES A LAST CHANCE TO PLAN RECOVERY. TIME TO CONSIDER A COVID-19 CVA?

If the announcements last week on the lack of downward tier revisions for many areas is the bad news, the silver lining for the struggling and affected businesses came in the reinstatement of the temporary suspension on the use of statutory demands and winding up petitions until 31 March 2021.

Earlier this year the UK Government introduced a number of temporary measures intended to avoid large scale insolvencies across the country. One of these measures was the suspension of wrongful trading liability.

This suspension was in place until September 30, 2020. Most of the other temporary measures were extended (e.g. the effective suspension of winding up petitions by creditors has been extended until December 31, 2020) but the suspension of wrongful trading liability was not extended.

• The hospitality industry has been fighting back against the Government's lockdown measures due to the lack of financial support, but there is absolutely no doubt that the worst is yet to come as having weathered lockdown 2.0, Government policy now looks set to deny many operators the ability to trade properly in the run up to Christmas, with hard hit businesses set to miss out on circa £7.8bn of trade.
• The majority of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 may have been extended, but directors remain mindful of their statutory duti

Where a company becomes insolvent, there is a considerable risk that its employees end up being both out of a job and out of pocket. With the news that Arcadia Group has fallen into administration this week, we explore where employees stand when they are owed money from their insolvent employer and what steps they can take to maximise the chance of recovering sums.

A floating charge will usually set out the rights exercisable by the floating charge holder after the point at which that floating charge has become "enforceable".  The floating charge might also contain language clarifying when the charge is deemed to be enforceable - typically after the occurrence of an event of default set out in the underlying facility agreement which is secured by that charge

Company Voluntary Arrangements (CVAs) are an insolvency procedure established under the Insolvency Act 1986 which allow a struggling company to reach a compromise on debts due with a sufficient majority of creditors, thereby avoiding a formal insolvency. They have primarily been used only by large high street retailers and are not often considered, particularly in Scotland, a realistic option for small and medium companies (SMEs).

In the face of the COVID-19 pandemic and with a new model available, we believe it is time for a rethink.

Almost 20 years ago the Government decided to abolish Crown Preference bringing it into step with other western jurisdictions such as Germany and Australia. It was considered at the time "inequitable" to elevate the public purse above ordinary unsecured creditors for whom the impact was potentially far greater.

Astonishingly, in the midst of a global pandemic and a looming "No Deal" Brexit, absent a dramatic last minute "U-turn" by the Government (let's face it, it wouldn’t be the first !), Crown Preference will return with effect from December 1st 2020.

This case is within the Chestnut Portfolio acquired by the Cerberus global private investment group and has been one of its most hard fought cases, involving personal debts and security of over £12m and litigation spanning back to 2016.

Summary

The Insolvency Service has released the latest insolvency statistics (to September 2020). 

These figures are particularly interesting as they shed light on the effects of the various changes to the insolvency landscape that have occurred since Covid-19 started to affect the economy.

Since March 2020, we have seen the introduction of the Corporate Insolvency & Governance Act ("CIGA"), Government schemes and lockdowns of various sizes, shapes and geographical restrictions.