The first half of 2020 saw a wave of company voluntary arrangements (CVAs) as companies explored their restructuring options against the backdrop of a darkening economic outlook.

On 26 June 2020, the eagerly anticipated Corporate Insolvency and Governance Act 2020 (“CIGA”) came into force. The result is that the changes made to insolvency law will now hinder the ability of landlords to recover unpaid rent from its tenants. We look at how the provisions of CIGA do this and the remaining options available to landlords to recover overdue rent.

What has CIGA changed?

(a) Statutory demands

Last week, ICSA (The Chartered Governance Institute) published a new guidance note on shareholder meetings under the Corporate Insolvency and Governance Act 2020 (CIGA). It has been drafted with a number of other organisations, with the support of the GC 100 (the Association of General Counsel and Company Secretaries working in FTSE 100 companies).

Suppliers can no longer terminate contracts, refuse to supply goods or services or amend payment terms with an insolvent customer due to its insolvency, save in limited circumstances. The new rules - brought in by the Corporate Insolvency and Governance Act 2020 (“CIGA”) - governing protection of supplies significantly restrict parties’ autonomy in relation to customer insolvency and will be a cause of concern for many suppliers.

New protection of supplies to insolvent companies

Everyone, including the least empathic in our society (aka, lawyers), knows that we should seek to uphold the golden rule and “do unto others…” with respect to family, friends, and acquaintances, but does this also apply in the corporate world? Apparently so, as a Delaware bankruptcy court just ruled that preferred shareholders with a bankruptcy-filing blocking right (also known as a “Golden Share”) must consider the effects on other shareholders and all other creditors when exercising such right.

Analyzing the inner workings of the elements required for the securities contract “safe harbor” protection under Section 546(e) of the Bankruptcy Code, the Bankruptcy Court for the SDNY dismissed a complaint seeking to recover approximately US$1 billion in allegedly fraudulent transfers brought against various transferees as part of the Boston Generating Chapter 11 case.

The recent Court of Appeal judgment in the case of Ezair v Conn [2020] EWCA Civ 687, handed down on 1 June 2020, has reiterated that section 234 of the Insolvency Act 1986 (“IA 1986”) provides only a summary procedure to assist insolvency office-holders in the exercise of their statutory duties. The Court made clear that section 234 IA 1986 does not provide scope for the determination of complex legal issues relating to the property in question.

Few, if any words can do justice to the impact COVID-19 has had on life in the UK over recent months. Legal practitioners’ use of the word “unprecedented” during this period is, well… unprecedented but even it doesn’t begin to describe the effect the pandemic has had on businesses across the country. There isn’t an industry or profession that hasn’t been touched by the effects of the pandemic and the legal sector is no different.

No, says the Delaware Bankruptcy Court in In re Maxus Energy Corp. In Maxus, the defendant, Vista Analytical Laboratory, Inc. (“Vista” or the “Defendant”), a designated critical vendor, sought summary judgement dismissing the preference complaint. The Court denied summary judgement finding that the critical vendor status did not per se insulate Vista from preference actions.

Background

Traditionally, Midsummer’s Day marks a time for festivities and optimism. But, as 24th June approaches, commercial landlords and tenants are unlikely to enjoy such sanguinity.

This article was first published by CoStar News on 5 June 2020 and can be seen here.