Brazilian companies have increasingly chosen arbitration as their preferred method for resolving domestic and international disputes. Now the impact of COVID-19 in Brazil has caused a sharp increase in insolvencies, and there is no expectation of a quick turnaround in the next months and, possibly, years to come. What, then, are the potential effects of Brazilian insolvency proceedings on arbitration in Brazil and abroad?
Are arbitration agreements affected by the opening of insolvency proceedings?
On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act included far-reaching wholescale reforms to the UK’s restructuring toolbox, including the introduction of the restructuring plan, which has the potential to be a gamechanger for restructurings.
It also included temporary measures dealing with COVID-19 impacts on companies. The two most significant temporary measures for companies facing financial difficulties as a result of the COVID 19 pandemic were:
As the coronavirus pandemic began spreading through Europe in the early months of 2020, the authorities had little idea of how best to respond – both to the virus itself, and its impact on livelihoods and businesses.
But since then, Europe’s major economies have introduced a suite of measures to contain COVID-19’s spread and keep the economic fallout from social restrictions to a minimum.
In this week’s update: designated members of an insolvent LLP breached their fiduciary duties when they agreed to waive a debt owed to the LLP, a gift of shares was effective, even though there was no evidence of an executed instrument of transfer and the Pre-Emption Group extends the relaxation of its principles to 30 November 2020.
Following the global implementation of stay-at-home orders in response to the novel coronavirus, businesses suffered unprecedented declines in demand. As the United States struggles to reign in the contagion, a number of household names – from Chuck E. Cheese to J.C. Penney – have filed for bankruptcy. Logically, distressed M&A transactions should rise as corporations struggle under historic levels of debt, but who is poised to take advantage of a boom in distressed M&A, what are the new realities of distressed M&A and how will these transactions proceed?
The truism that every crisis brings about opportunities also applies to mergers and acquisitions (M&A). Companies that encounter difficulties as a result of the COVID-19 pandemic, or even have to file for insolvency, will have to seek equity investors or joint venture partners, or otherwise sell parts or, in worst cases, all of their business operations. This provides ample opportunities for corporate buyers to enter a new market or expand their existing business or portfolio – for an attractively low price.
“Buy land, they’re not making it any more”. Are CVAs making a mockery of Mark Twain’s advice?
“Lies, damned lies, and statistics”
Court closures
India was in complete lockdown from 24 March until 31 May, a situation that inevitably impacted the functioning of Indian courts. Even though most implemented measures to conduct virtual hearings, these hearings have been limited to only the most urgent cases. Once courts return to business as usual, they are likely to receive a surge in filings, which will increase the backlog in a country that already has 30 million pending cases.
The Abu Dhabi Global Market (ADGM)continues to enhance its legislative framework after recently publishing its fourth round of amendments to the ADGM Insolvency Regulations 2015.
As part of the latest round of amendments, the ADGM has introduced a new chapter dealing with priority funding (PDF), similar to US Chapter 11 style debtor-in-possession (DIP) funding.
In this week’s update: more details on plans for reforms of governance, audit and executive pay, Companies House is ending its temporary strike-off policy, the court orders virtual meetings on a scheme of arrangement and the FRC calls for participants in a review of company disclosures.