This note considers how the recent changes to UK insolvency law introduced by the Corporate Insolvency and Governance Act 2020 ("CIGA") might affect those involved in the sale and purchase of commodities. In particular, it looks at the impact of Section 14 of CIGA on contracts for the supply of goods or services, and on the typical rights and remedies of the seller / supplier under such contracts.

In the latest edition of Going concerns, Stephenson Harwood's Asia restructuring and insolvency team touch on key changes in Singapore brought about by the recent Singapore Insolvency, Restructuring and Dissolution Act 2018 (and where applicable, the impact on the shipping industry), and the positions in Singapore and Hong Kong on winding up petitions vs arbitration clauses.

Content

Get to know the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA") Winding up petitions vs arbitration clauses (SG) The prima facie standard of review prevails

The Corporate Insolvency and Governance Act 2020 was passed on 25 June 2020. The legislation has been in contemplation for a number of years, and has implemented a significant reform to the UK's restructuring and insolvency framework. It has also implemented certain temporary measures that are designed to protect and support businesses, protect jobs and, in doing so, attempt to preserve the economy during the COVID-19 pandemic.

Background

The Finance Act 2020 received Royal Assent on 22 July 2020 and will restore HMRC as a preferential creditor on insolvency (Crown Preference) with effect from 1 December 2020.

There had been speculation that the Government would shelve or at least postpone the reintroduction of Crown Preference in the wake of Covid-19. In fact, even before the pandemic, the proposals had been widely criticised by the restructuring and insolvency industry as harmful to the UK’s corporate rescue culture.

Recent Hong Kong cases have highlighted varying approaches regarding the impact of arbitration clauses on insolvency proceedings, in particular, on the Court’s discretion to make a winding-up order where a debt is disputed.

Recent judgments have varied between the so-called Traditional Approach which requires the company-debtor to show a genuine dispute on substantial grounds and the Lasmos Approach which requires the company only to commence arbitration in a timely manner.

Shandong Chenming Paper Holdings Limited v Arjowiggins HKK 2 Limited CACV 158/2017 (date of judgment 5 August 2020)¹

Introduction

Summary

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) came into force on 26 June 2020 after a fast-tracked consultation process. Intended to provide a lifeline to struggling businesses during the COVID-19 pandemic and beyond, it consists of temporary measures, meant to alleviate the short-term disruption caused by the pandemic and permanent measures, which are more broadly designed to assist companies in times of difficulty.

What does the Corporate Insolvency and Governance Act 2020 (CIGA) do?

CIGA introduces various changes to various provisions of the Insolvency Act 1986 and the Companies Act 2006.

Some of these changes are designed to be permanent changes to the insolvency landscape (largely implementing proposals for insolvency law reform introduced in 2018) – for example, the introduction of a moratorium, a ban on termination provisions (also known as ipso facto clauses) and a new pre-insolvency rescue and restructuring regime.

Re Patrick Cowley and Lui Yee Man, Joint and Several Liquidators of the Company [2020] HKCFI 922(date of judgment: 27 May 2020)

The Corporate Insolvency and Governance Act received royal assent on 25 June 2020 and comes into force immediately.

The Act introduces a range of new corporate restructuring tools and suspends, temporarily, parts of the existing insolvency regime. The purpose of this note is to update you on two key aspects of the Act: the moratorium on legal action and the temporary changes in relation to statutory demands and winding-up petitions.

Moratorium on legal action