With the increase in global trade and business, often involving complex corporate structures in multiple jurisdictions, we expect to see a significant increase in cross-border insolvency and restructuring matters in coming years. This is especially the case with rapid advancements in technology and digital change driving “borderless” transactions and investments in every industry.
On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force, introducing a number of temporary measures to assist companies facing financial difficulties as a consequence of COVID-19. These temporary provisions apply retroactively to cover the period commencing 1 March 2020 (26 March 2020 with respect to corporate governance provisions) and ending on 30 September 2020 (the Relevant Period).
On 25 June 2020, the Corporate Insolvency and Governance Act 2020 (the Act) received Royal Assent, and the majority of its provisions are now in force. The Act has introduced a number of permanent reforms and temporary measures, which together represent the most significant change to English insolvency law in nearly 20 years.
Permanent Reforms
The permanent reforms include:
It is common in a corporate Chapter 11 bankruptcy to sell substantially all of a debtor’s assets. When the sale is supervised and approved by a bankruptcy court, purchasers will be protected from subsequent attacks on the sale or its process.
This is often a question for faced by office-holders of insolvent companies when investigating a company’s affairs, and more of a concern for former directors and shareholders when potentially facing a claim for the return of unlawful dividends or misfeasance.
TV rental business, Box Clever, was created as a joint venture between Granada (now ITV) and Thorn (now Carmelite).
The Box Clever business was later sold and administrative receivers were subsequently appointed over Box Clever companies.
The Pensions Regulator (“TPR”) issued Financial Support Directives (“FSDs”) against five ITV companies in relation to the Box Clever defined benefit pension scheme. ITV referred the determinations to the Upper Tribunal.
In the wake of the Carillion insolvency and the Toys R Us administration, there are contrasting tales from two different UK businesses.
The engineering business Rolls-Royce is going against the trend and has announced that it will keep its defined benefits pension scheme open for current members until January 2024.
The scheme is running at a £1.4 billion surplus, which will also allow the company to decrease its contributions to its defined benefit retirement fund by £145 million over the next three years.
At the start of 2017, UK businesses had reported a 33% risk of insolvency, compared to the end of 2017 which saw that figure increase to nearly 40%.
These figures were calculated by drawing together key performance indicators including balance sheets and records of the directors’ successful (or unsuccessful) directorship history.