EXECUTIVE SUMMARY
The UK government has extended its suspension of various rules and procedures affecting distressed businesses as a result of the coronavirus (COVID-19) pandemic. However, with the UK lockdown easing on a rolling basis up to 21 June 2021, these may be the last of the blanket extensions across all of these areas. Expect the gradual reintroduction of some of the rules and procedures from 1 July onwards.
The Extensions to the End of June 2021
On March 27, 2021, President Biden signed into law the COVID-19 Bankruptcy Relief Extension Act (the Extension Act). The Extension Act temporarily extends certain COVID-19 bankruptcy relief provisions enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which were further amended and/or extended as part of the Consolidated Appropriations Act (the CAA). Certain of the amendments included in the CAA and the Extension Act are highlighted below:
Debtors and Paycheck Protection Program Loans
On March 19, 2021, the Court of Appeals for the Third Circuit issued its decision in In re Orexigen Therapeutics, Inc., 2021 WL 1046485 (3rd Cir. Mar. 19, 2021), affirming lower courts’ decisions rejecting “triangular setoff” agreements as a proper basis for the application of setoff rights under section 553 of the Bankruptcy Code.
On 1 March 2021, Brazos Electric Power Cooperative, Inc. (“Brazos”) commenced a chapter 11 bankruptcy case in the United States Bankruptcy Court for the Southern District of Texas. Brazos is a Texas-based non-profit electric cooperative corporation that provides wholesale electricity to its members, which, in turn, provide retail electricity to Texas consumers.
The long-anticipated wave of civil enforcement actions involving participants in the Paycheck Protection Program (PPP) has begun.
A comprehensive change to German insolvency and restructuring law has become effective starting 1 January 2021. The change allows that a company's reorganization is possible without insolvency and includes the majority decision of its creditors.
n December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021 (the Act), which was just signed by President Donald Trump. The Act makes certain amendments to the United States Bankruptcy Code (the Bankruptcy Code) relating to small business bankruptcies commenced under Subchapter V of Chapter 11, as well as to individual bankruptcies under Chapters 7, 11, 12, and 13 of the Bankruptcy Code. This article highlights those changes to the Bankruptcy Code that small businesses should consider utilizing in weighing the benefits and potential costs of filing for bankruptcy.
The Federal Court has today sensibly ruled that security interests do not vest in the company grantor simply because the company had at some time previously been in liquidation, administration or subject to a deed of company arrangement (DOCA). This decision should come as a great relief to secured lenders and suppliers to companies that have successfully passed through a restructuring and have resumed "business as usual".
Executive summary
On a UK company’s insolvency, the UK tax authority (HMRC) will become a preferential creditor in respect of certain unpaid taxes (Crown Preference) with effect from 1 December 2020. Despite lobbying against the move (including in light of the COVID-19 pandemic), the UK government has persisted with the change, perhaps in an attempt to shore up its tax take.
The reform in context