As shopping centre owner Intu warns it could be forced to shut many of its sites if it can’t resolve its financial issues by tomorrow, 26/06/2020, our real estate and corporate restructuring and advisory experts take another look at what could happen next.
On top of the multiple challenges hitting retail and leisure landlords and occupiers arising from COVID-19, the news that Intu has had to write down the value of its shopping centre portfolio by nearly £2 billion came as further bad news.
The Supreme Court’s decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 (17 June 2020) has been eagerly anticipated.
The appeal raised important questions about the compatibility of adjudication with the operation of insolvency set-off. The Supreme Court allowed the appeal, deciding that a liquidator was entitled to refer an insolvent company’s claims to adjudication where there were cross-claims between the parties.
The facts
Force majeure clauses and the doctrines of impossibility and/or impracticability remain among the most-discussed legal topics of the COVID-19 pandemic. Courts across the country, finally open, are grappling with those issues and giving some insight as to how these topics may play out in future cases.
The Corporate Insolvency & Governance Bill is making its way through Parliament at the moment. It introduces a number of new processes the focus of which is to assist in the rescue of companies as a going concern.
The biggest shake-up of English insolvency law for a generation
This summary is based on the provisions of the Bill as drafted at 15 June 2020. It is still subject to change before it becomes law.
New Moratorium process – basic overview
The Corporate Insolvency and Governance Bill was recently introduced into Parliament. While the effects of some of the changes proposed are intended to be only temporary, they have potential consequences for pension schemes.
Changes of particular relevance are as follows:
- Restrictions on the use of statutory demands for winding up petitions.
- New Moratorium process
- Court approved corporate restructuring plan
The Bill received its second and third readings on 3 June 2020 and will now go to the House of Lords for consideration.
Seyfarth Synopsis: In acquiring a company in bankruptcy, there is often a tendency to think this guarantees the purchaser will be “free and clear” of any liability (including so-called “successor liability”). This is not necessarily so with wage and hour liability, particularly if the purchaser merely continues to operate virtually the same business that was acquired.
The government has published the Corporate Insolvency and Governance Bill which, if passed, will significantly restrict suppliers’ ability to exit commercial agreements due to restructuring or insolvency-related causes.
That the current pandemic has thrown a curveball at many businesses is a given.
At the end of February, the Bank of Scotland Business Barometer reported that overall business confidence in the UK was at a net balance of 23%. Only two months later and confidence plunged to minus 29%.
The government has introduced fundamental changes to the procedures for presenting winding-up petitions and making winding-up orders in the Corporate Governance and Insolvency Bill.
Courts continue to address constitutional and statutory challenges to COVID-19-related legislation and governmental orders. Among them, courts are examining eligibility for PPP loans under the CARES Act, as well as the constitutionality of “stay at home” and similar orders restricting activities.
PPP loans under the CARES Act
The COVID-19 pandemic and the drastic measures taken in an effort to mitigate its adverse impact have sent shock waves throughout the US and global financial systems. COVID-19 and measures including travel bans, shelter-in-place orders and widespread business closures have caused precipitous changes in customer spending and demand, supply chain disruptions, sharp declines in revenue and other operational challenges across a wide range of economic sectors. Businesses worldwide now confront unprecedented and mounting challenges and distress.