Overview

The highly anticipated Supreme Court decision in Bresco Electrical Services Ltd (in Liquidation) v Michael J Lonsdale [2020] UKSC 25 has endorsed the use of adjudication in the context of insolvency set off, substantially reversing the decision of the Court of Appeal.

Suppliers are now prevented from terminating many contracts and supplies of goods or services if the customer is subject to a ‘relevant insolvency procedure’ (such as going into administration, CVA, or appointing a provisional liquidator).

This follows the Corporate Insolvency and Governance Act 2020, which came into force on 26 June. Although Coronavirus has accelerated the passing of the Act, these are set to be permanent changes.

What can’t suppliers do?*

DAC Beachcroft's GC Horizon Scanner is a selection of legal and regulatory developments that we consider are the most interesting and relevant to General Counsel, senior managers and professionals, allowing them to keep abreast of issues which are likely to impact their business, prepare for opportunities and mitigate risks.

The Corporate Insolvency and Governance Act 2020 came into force on 26 June bringing in measures to alleviate the burden on businesses during the Covid-19 pandemic and allow directors to focus their efforts on continuing to operate. In this article we consider the temporary changes to the wrongful trading regime and other key changes introduced by the Act.

Temporary wrongful trading relaxation

The first tentative steps are now being taken to ease the lockdown restrictions imposed on the nation as a consequence of the COVID-19 pandemic and thoughts are turning to how we can return to “normal”. The construction sector is no exception but finds itself in a slightly different position to many businesses as sites were never required to close (provided that work could carry on “safely”). Nevertheless the impact of COVID-19 has wreaked havoc on the finances of the construction sector and the viability of current and future projects.

This advisory outlines the various options available to landlords after service of a statutory demand on a tenant and the tenant does not pay the debt. It also summarises the general processes, costs, advantages and disadvantages of each option. These options include:

On 20 May 2020, the Government introduced the Corporate Insolvency and Governance Bill in Parliament. The Bill is a much awaited development following the Secretary of State for Business, Energy and Industrial Strategy’s statement on 28 March 2020 announcing key measures to help businesses address the challenges resulting from the impact of coronavirus.

Financial services firms subject to special insolvency regimes supervised by the FCA, PRA, and other financial services regulators have been largely excluded by the Bill.

The Commodity Futures Trading Commission proposed its first comprehensive overhaul of its bankruptcy rules since 1983. The recommended new rules do not substantively change anything but codify many CFTC interpretations and views developed over 40 years and refresh references to means of communication and recordkeeping practices to reflect current norms.

At the Commodity Futures Trading Commission (CFTC) open meeting on April 14, the CFTC unanimously approved proposed amendments to Part 190 of its rules governing bankruptcy proceedings of commodity brokers, including futures commission merchants (FCMs) and derivatives clearing organizations (DCOs). The proposed amendments are intended to comprehensively update Part 190 to reflect current market practices. Among other revisions, the proposed amendments to Part 190 would: