Debtors and investors have an enhanced choice of restructuring venues as the EU Restructuring Directive is rolled out in Member States

The decision raises new questions about whether cross-border insolvency recognition and assistance between mainland China and Hong Kong will be a two-way street.

A restructuring plan completed earlier this year by Smile Telecoms notches up a number of firsts.

African telecommunications provider Smile Telecoms Holding Limited, incorporated in Mauritius, successfully completed a restructuring plan (the Plan) under Part 26A of the UK Companies Act 2006 at the end of March 2021.

The Plan features a number of novel actions, including:

Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in France, Hong Kong, Italy, Singapore, and the United Kingdom and as an affiliated partnership conducting the practice in Japan. Latham & Watkins operates in South Korea as a Foreign Legal Consultant Office. Latham & Watkins works in cooperation with the Law Office of Salman M. Al-Sudairi in the Kingdom of Saudi Arabia.

In a recent judgment, which provides useful clarification to liquidators of companies, the High Court has held that section 631 of the Companies Act 2014 (the “Act”) does not confer a free-standing jurisdiction to order disclosure of information or documentation. Furthermore, the Court held that the inspection right conferred by section 684 of the Act cannot be used as a vehicle for carrying out a “fishing expedition” of a wide range of documents.

Background

This briefing was originally published on 27 July 2021 following the enactment of the Companies (Rescue Process for Small and Micro Companies) Act 2021. The Act was commenced on 8 December 2021.

Introduction

The reforms, which are the result of the transposition of the EU’s Restructuring Directive, should come into force in October.

Key Points:

The decision provides new judicial guidance for determining the boundaries of cross-class cram down tests. 

On 28 June 2021, the High Court declined to sanction a restructuring plan proposed by Hurricane Energy plc (Hurricane), an AIM listed oil drilling company, under Part 26A of the Companies Act 2006 (Act). The plan would have seen shareholders diluted to 5% of Hurricane’s equity, with the remaining 95% issued to bondholders as consideration for a partial debt-for-equity swap. 

The ruling confirmed that Section 423 of the Insolvency Act 1986 has extensive international reach, and does not require a transaction at an undervalue to leave the debtor with insufficient assets.

Background

The decision confirms that company voluntary arrangements remain a flexible tool for restructuring leasehold portfolios.

• No rigid test exists for “basic fairness” that requires a landlord to receive at least market rent, or that contractual rent should be interfered with to the minimum extent necessary.

• If a landlord is entitled to terminate the lease and receive a better outcome than in the alternative, any automatic unfairness from changes to the terms of the lease is negated.

• Whether a CVA is unfairly prejudicial depends on all the circumstances of the case.