The enacted Corporate Insolvency and Governance Act (the Act) introduces three permanent reforms to the existing insolvency legislation and certain temporary measures designed to address the immediate impact of COVID-19 on UK businesses. Among other things, the Act looks to maximise the potential for struggling companies to be maintained as a going concern. As market participants and the courts get to grips with the new legislation, it is clear that there will be some impact on the special situations landscape and the business of stressed and distressed investment.

The Corporate Insolvency and Governance Act 2020 (the “Act”) came into force on 26 June 2020 and introduces both temporary provisions linked to the coronavirus pandemic and more permanent changes to the insolvency framework. The key measures can be summarised as below.

Temporary measures

Wrongful trading

Permanent Reforms

Moratorium: a new stand-alone moratorium to provide businesses with an initial 20-business-day stay from creditor action.

The US Court of Appeals for the Sixth Circuit affirmed that a state court’s finding of “willful and malicious injury” in connection with the misappropriation of trade secrets entitled the plaintiff, in the defendant’s subsequent bankruptcy proceeding, to summary judgment of nondischargeability on collateral estoppel grounds. In re Hill, Case No. 19-5861 (6th Cir. May 4, 2020) (Donald, J.).

“Bankruptcy is about financial death and financial rebirth. Bankruptcy is the great American story rewritten. We’re a nation of debtors.” -Elizabeth Warren

Amid the Coronavirus (COVID-19) pandemic and related economic turmoil, bankruptcy filings in the United States are on the rise. Non-US insurers should review contractual arrangements with US insureds and brokers, and establish a plan to deal with bankruptcy filings across the United States in a consistent fashion.

The extraordinary pandemic-based financial challenges impacting hospitals, health systems and other providers as a result of the Coronavirus (COVID-19) should prompt boards to re-evaluate focus on their duty to monitor the organization’s financial condition. Existing case law provides useful direction on the scope of these duties, particularly during periods of financial distress. There is value to enhancing the engagement of the board’s finance (or similar) committee on solvency matters during this period of crisis.

Guidance for companies and company directors in Northern Ireland.

Overview

The adverse trading position caused by the COVID-19 situation is significantly impacting the majority of companies and is also bringing the duties of directors – particularly those relating to directors’ actions when a company is in difficulty or insolvent – into sharp relief.

Der Gesetzesentwurf sieht Regelungen zu Aussetzung der Insolvenzantragspflicht, Zahlungsverboten, neuen Darlehen und Sicherheiten sowie zur Insolvenzanfechtbarkeit vor:

1. Insolvenzantragspflicht

The draft bill provides regulations regarding the suspension of the obligation to file for insolvency, payment prohibitions for management, new loans and securities, as well as claw-back risks:

1. Obligation to File for Insolvency

With the measures in place to deal with the COVID-19 situation, volatility and disruption continue to affect Northern Ireland. As a leading full-service law firm, Arthur Cox is ideally placed to mobilise multi-disciplinary teams of lawyers to provide advice and support to organisations.