The ongoing COVID-19 pandemic has raised pressing questions about how a force majeure provision in a lease will affect a tenant's obligation to pay rent.

The existing jurisdictional conflict¹ between US bankruptcy courts under the Federal Bankruptcy Code and the Federal Energy Regulatory Commission (FERC) regarding required approvals for a debtor in bankruptcy to reject an executory Federal Power Act (FPA)-jurisdictional agreement has also been asserted by FERC with respect to Natural Gas Act (NGA)-jurisdictiona

In Houston, oil is king. But this year, several energy titans are among a troubling and growing corporate list turning to bankruptcy protection. Even if the economy rebounds unexpectedly, experts expect the sharp increase in bankruptcy proceedings to continue, at least for the remainder of 2020.

Bankruptcy Boom Creates E-Discovery Issues

Secured lenders are troubled at the recent news that a New York state court judge denied a preliminary injunction request filed in the Supreme Court of New York by a group of dissenting first-lien lenders, seeking to prevent a borrower, Serta Simmons, and certain first-lien consenting lenders from entering into a recapitalization transaction. In exchange for the purchase of the consenting lenders’ debt at a discount, the consenting lenders received new super-priority debt ranking ahead of the non-consenting lenders’ debt.

As discussed in earlier posts,¹ substantial uncertainty exists over whether companies in bankruptcy are eligible to pursue funding pursuant to the SBA’s Paycheck Protection Program, or PPP, which was established by the CARES Act to support small businesses by offering SBA-guaranteed loans on advantageous terms.

The Corporate Insolvency and Governance Bill (“Bill”) published on 20 May 2020 proposes to introduce a number of significant reforms to UK restructuring and insolvency law . The scope of the Bill is wide ranging and includes measures to protect companies in financial difficulty as a result of the current pandemic. Several of the provisions contained in the Bill will have particular impact on the landlord and tenant relationship during the current COVID-19 crisis, which is the focus of this article.

Temporary prohibition against petitions on the basis of statutory demands

The Corporate Insolvency and Governance Bill 2020 (the “Bill“) introduces a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). It is proposed that the legislation governing the Restructuring Plan will sit alongside the schemes of arrangement and be included in a new Part 26A to the Companies Act 2006.

The Restructuring Plan will not apply to companies that are solvent with no risk of insolvency; rather it will only apply where two conditions are satisfied:

On 20 May 2020, the UK Government published the Corporate Insolvency and Governance Bill (“CIGB” or the “Bill”) which proposes several changes aimed at improving the chances of company rescue and better overall returns for creditors. One of the proposed changes is to restrict parties’ ability to exercise contractual termination rights where a company enters into an insolvency or restructuring procedure, meaning that for most suppliers and supply contracts a termination clause will be ineffective upon insolvency.

On 20 May 2020, the UK government announced the Corporate Insolvency and Governance Bill (the “Bill”), introducing a mixture of permanent and temporary measures, the latter being in response to the financial challenges companies are facing as a result of the Covid-19 pandemic and lockdown. In the absence of extensive consultation with insolvency practitioners and industry experts, it remains to be seen how effective the measures will be in practice.

A winding-up petition is one of the most critical pieces in a creditor’s armoury where a debt remains unpaid. However, in these challenging times, the government clearly wants to provide a temporary shield to companies who are unable to pay their debts due to COVID-19.