The Government has announced that it will legislate to prohibit the enforcement of certain contractual termination clauses ('ipso facto clauses').

As with other aspects of the response to recent insolvency and corporate governance consultations, this has given us pause for thought.

The Government has published its response and action plan following its consultation in March this year on reforming the UK’s corporate governance landscape in the context of insolvent companies.

In its original consultation, the Government put forward various proposals to deal with perceived deficiencies in the management of troubled companies that may be leading to poorer outcomes for creditors, employees and other stakeholders.

In March 2018, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on proposed reforms to the UK’s insolvency and corporate governance landscape. That consultation included certain significant proposals, including extending liability to the directors of holding companies that sell insolvent subsidiaries.

The High Court has found that two directors and one former director of a company were in breach of their duties by causing the company to implement a reorganisation and a capital reduction when they were aware there was a risk it would lose its source of income.

In addition, the statutory statement of solvency supporting the capital reduction was invalid because the director had not formed the opinion set out in it. As a result, the capital reduction and a subsequent dividend were unlawful, and the directors were liable to repay the dividend.

What happened?

The High Court has held that two director-shareholders of a company who were unsuccessfully prosecuted for fraud could not claim back the drop in the value of their shares when the company’s business failed.

What happened?

The Department for Business, Energy and Industrial Strategy (BEIS) has published a consultation on insolvency and corporate governance.

The consultation is aimed primarily at improving corporate governance in firms that are in or approaching insolvency. However, it also puts forward proposals for improving the wider framework of corporate governance.

The key proposals from the consultation are set out below.

The decision in Mezhprom v Pugachev, which was handed down on 11 October 2017, has potentially wide-ranging ramifications for trustees and the private client industry more generally.

Although the judgment is a first instance decision and may be appealed, the approach taken by the judge in this case to the analysis of powers conferred on protectors is an important development.

The U.S. Court of Appeals for the Second Circuit issued its ruling in Marblegate Asset Management, LLC v. Education Management Corp. that provided much needed clarity to creditors and issuers involved in out-of-court restructurings affecting noteholders. The issue for the court was whether Education Management Corp. (“EDMC”) violated the Trust Indenture Act (the “TIA”) when it implemented a restructuring that impaired the rights of one of its unsecured noteholders, Marblegate Asset Management, LLC (the “Noteholder”).

ITALY

BANCA MONTE DEI PASCHI DI SIENA SpA

Monte dei Paschi di Siena (“Monte Paschi”) founded in 1472 and said to be the oldest bank in the world is, at the time of publication, in a race against the clock to raise EUR 5 billion in capital by the end of December to avoid either a state bail-out or potentially being wound down by the European Central Bank (“ECB”).

On 1 December 2016, the current president and Socialist leader, Francois Hollande, decided not to seek a second term as President of France. Mr. Hollande is the first French President to decide not to run for a second term.