The High Court has ruled that directors breached their duties by taking up the company’s business opportunity for their own benefit, even if the company was unable to take up that opportunity by reason of its financial position: Davies v Ford & Ors [2020] EWHC 686.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law March 27, 2020, and the Small Business Reorganization Act of 2019 (SBRA), which went into effect Feb. 19, 2020, provide options for small business debtors considering chapter 11 bankruptcy protection. Designed to alleviate costs and create greater efficiencies in the chapter 11 process, the SBRA was modified by the CARES Act to raise the maximum qualifying debt level from approximately $2.7 million to $7.5 million, through March 27, 2021.
Enacted March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) places short-term obligations and restrictions on lenders and servicers of federally backed loans. As part of these limitations due to Coronavirus Disease 2019 (COVID-19), lenders and servicers are temporarily subject to moratoriums on foreclosures, mandatory forbearance obligations, and revised credit reporting obligations.
In Joint Provisional Liquidators of Moody Technology Holdings Ltd [2020] HKCFI 416, the Hong Kong Court of First Instance (the “Hong KongCourt”) granted a recognition order to foreign provisional liquidators who were appointed on a soft-touch basis, to explore and facilitate the restructuring of a company. The order was made despite soft-touch provisional liquidation being per se impermissible in Hong Kong.
Background
During the Global Financial Crisis, borrowers who needed to refinance their maturing debts faced difficulty. Lenders had neither the appetite nor the ability to lend, save in limited circumstances. The income generated by commercial real estate assets often did not change, however.
In Spain individuals and entities have an obligation to file for insolvency if they are unable to regularly meet their obligations within two months of the position of insolvency coming to light. Breach of that obligation could lead to civil (and even criminal) liability.
The legal obligation imposed by the Spanish Insolvency Law 22/2003, of 9 July (the “Spanish Insolvency Law”), has been modified by Royal Decree-law 8/2020 (the “RDL”), of 17 March, on extraordinary measures to tackle the economic and social impact of COVID-19.
On 28 March, UK Business Secretary Alok Sharma announced that the rules relating to ‘wrongful trading’ will be suspended on account of the issues that Coronavirus Disease 2019 (COVID-19) presents.
Both the COVID-19 pandemic and the measures taken by governments have led to unprecedented legal questions that require immediate attention and solutions. These are challenging times. We have therefore prepared the following overview of some of the pertinent legal questions and the answers to consider, in the hope they provide useful preliminary guidance.
Topic | Main issues in relation to the risk of director liability |
Question |
The Department for Business, Energy and Industrial Strategy (“BEIS”) over the weekend announced a number of proposed changes to UK insolvency law in response to the COVID-19 crisis.
The principle in ex parte James, under which the Court will not permit its officers (such as a liquidator) to act in a way which, although lawful, does not accord with the standards of right-thinking people, has recently been clarified by the English Court of Appeal in Lehman Brothers Australia Limited (in liquidation) v Edward John Macnamara & others (the joint administrators of Lehman Brothers International (Europe) (in administration)) [2020] EWCA Civ 321