This article sets out some reflections on the decision of the Supreme Court in Sevilleja v Marex Financial Limited [2020] UKSC 31 from July 2020 which clarifies the scope of the so-called ‘reflective loss’ rule. The first instance judgment raised some comment-worthy issues regarding the economic torts which were not the subject of any appeal.

The Corporate Insolvency and Governance Act 2020 (“CIGA”), which came into force on 26 June 2020, introduced a series of new “debtor friendly” procedures and measures to give companies the breathing space and tools required to maximize their chance of survival. The main insolvency related reforms in CIGA (which incorporates both permanent and temporary changes to the UK’s laws) include:

1. New moratorium to give companies breathing space from their creditors

2. Prohibition on termination of contracts for the supply of goods and services by reason of insolvency

The government has confirmed that restrictions on commercial landlords on presenting a winding-up petition against tenants that have not paid rent are to be extended to the end of 2020.

The announcement follows confirmation last week that it has extended its moratorium preventing the eviction of commercial tenants for non-payment of rent until the end of 2020.

Whilst the announcement will be welcomed by tenants supporting them into the important Christmas trading period, landlords will undoubtedly feel that their own financial position is being ignored.

This is the second of two articles considering the corporate insolvency aspects of the Corporate Insolvency & Governance Act 2020 (the Act).  In the first article, we looked at the temporary measures introduced by the Act in response to the Covid-19 crisis and this second article explains the permanent reforms of insolvency law provided for in the Act.  These changes came into effect on 26 June 2020.

This first article comments on the temporary measures that are designed to alleviate the economic impact of COVID-19, namely the suspension of wrongful trading and restrictions placed on creditors serving statutory demands and winding-up petitions. These temporary provisions are intended to provide businesses with some breathing space during the current pandemic whilst they consider rescue options.

The U.S. Court of Appeals for the Sixth Circuit (the “Sixth Circuit”), whose jurisdiction includes Michigan, Ohio, Kentucky, and Tennessee, recently held that, under Chapter 13 of the Bankruptcy Code, a debtor’s pre-petition and certain post-petition voluntary retirement contributions are excludable from the debtor’s disposable income, which is used to satisfy a debtor’s obligations to its unsecured creditors.

The decisions made and actions taken, or not taken, by companies and their directors in response to the COVID-19 crisis are being intensely scrutinised by regulators, shareholders, and creditors alike. It is anticipated that some businesses may face claims relating to their poor contingency planning and their practical and wider reactions to the crisis. So, an increase can be expected in claims on directors and officers (D&O) insurance policies.

The High Court has dismissed applications to restrain the presentation of winding up petitions for reasons relating to the Covid-19 pandemic.

Background

Under the Scheme, furloughed employees, whose services cannot be used due to the current COVID-19 pandemic, will not be permitted to work for their employer during the period of furlough but the employer will be able to apply for a grant from the government to cover the cost of continuing to pay the employees 80% of their salary up to a cap of £2,500 per month.

Companies are now faced with unprecedented challenges presented by the coronavirus pandemic. In this context, company directors will be trying to do everything they can to protect and preserve the business. However, they do still need to remember their legal duties, so as not to expose themselves to the risk of personal liability if their actions go beyond what the law allows.

Practical steps which directors should be taking now, as explained in more detail below include: