One of the main differences in insolvency law between Scotland and England & Wales relates to the challengeable transactions regime under the Insolvency Act 1986.
In both jurisdictions, transactions that are entered into before a formal insolvency process begins can be attacked if they are detrimental to the creditors of the insolvent company. However, although both systems use similar language and address similar concerns, the law in the two jurisdictions is different, most notably with different time periods and defences to a challenge.
The pandemic has created a chaotic business environment in which it is has at times been practically impossible to make any definitive plans. Lockdown measures have changed regularly, legislation has been introduced and extended and the rules for conducting business (when it is even possible to trade) have varied across the UK and have at times been criticised by those most harshly effected as being arbitrary and unscientific. All of this has often happened at very short notice.
Background
The European Union (Insurance and Reinsurance) (Amendment) Regulations 2021 (2021 Regulations) will come into operation on 30 June 2021, giving effect to Directive (EU) 2019/2177 of the European Parliament and of the Council of 18 December 2019 (2019 Directive).
The 2019 Directive amends the Solvency II Directive (2009/138/EC), the MiFID II Directive (2014/65/EU) and the 4th Anti-Money Laundering Directive (2015/849/EU).
As a result of temporary provisions that have been in place since March 2020*, during the Covid period directors have been broadly protected from the risk of personal liability for wrongful trading. Those temporary provisions are due to end on 30 June, 2021 and as a result, the law on wrongful trading again becomes highly relevant.
In a recent High Court decision, a provisional liquidator was ordered to pay the costs of the official liquidator (who replaced the provisional liquidator and was appointed as the new liquidator of the company) and Revenue without being entitled to have recourse to the assets of the company.
In England, it is common and quite straightforward for companies and LLPs to grant all assets security by way of a debenture which includes a series of fixed charges over specified assets, an assignment of material leases, insurances and other contracts and a floating charge over assets which are not expressly subject to those fixed charges. That same approach does not work in Scotland, at least not without some adaptation.
The Examinership of Norwegian Air
Key Features
// C O R P O R AT E R E S T R U C T U R I N G & I N S O LV E N C Y
The Examinership of Norwegian Air Group Key Features
On 26 May 2021 Norwegian Air Shuttle ASA (NAS) and related companies (Norwegian Air) exited examinership in Ireland. Through the restructuring Norwegian Air:
raised NOK 6 billion (590 million) in new capital through share and hybrid debt offerings;
The Act provides that a payment clause will be invalid if it makes payment conditional on:
The Department of Enterprise, Trade and Employment has published the outline of proposed legislation for a dedicated rescue and restructuring framework for insolvent or potentially insolvent small and micro companies – see here.
Virgin Active Case - The Verdict
The High Court in London yesterday ruled in favour of Virgin Active's controversial restructuring plan. This is the second example of the court exercising its discretion to sanction a contested plan which sought to rely on the so called cross-class cram down; and the first to affect landlords.
The case, heard by Mr Justice Snowden (who has received praise for his balanced approach throughout the court process) sets the precedent for plans being used to bind landlords that vote against them.