At A Glance

This past month, the Supreme Court overturned the Court of Appeal’s decision in Triple Point Technology Inc v PTT Public Company Ltd[2021] UKSC 29, and most notably, found that liability for liquidated damages survives termination of the contract and extends to work that was not completed as at the date of termination.

Background

The recent case of Official Receiver v Deuss [2021] EWHC 1842 (Ch) provides legal and insolvency practitioners with guidance as to the test to be applied when considering whether a third-party costs order should be made against a liquidator who takes steps against an alleged de facto director of the company in liquidation. In this case, the step concerned was an application for public examination pursuant to section 133(2) of the Insolvency Act 1986 (the Section 133 Application).

Following the substantial impact of the COVID-19 pandemic on global trade and business operations in the UAE, the Government of the UAE has taken measures to protect businesses facing financial difficulty. Among these measures has been a mechanism that provides relief to businesses in financial distress because of the pandemic within the framework of the UAE Federal Bankruptcy Law No. 9 of 2016 (the Bankruptcy Law).

On 28 June 2021, the UK High Court declined to sanction Hurricane Energy Plc’s restructuring plan. This was the first time a restructuring plan seeking to achieve a debt-for-equity swap against the wishes of existing shareholders had come before the court.

Background

As the end of Covid restrictions rapidly approaches in the UK, a number of businesses are considering how they might deal with the issue of debts which have built up since the start of the first lockdown in March 2020. Whilst an encouraging number of companies have been able to avoid formal insolvency proceedings, the various Government support schemes and restrictions on enforcement action, which were introduced to help companies navigate the pandemic, have led to significant liabilities accruing on balance sheets.

Today (16 June 2021) the UK governmentannounced a further extension of some (but not all) of the temporary measures first introduced by the Corporate Governance and Insolvency Act 2020 (CIGA) in June last year.

The two most significant temporary measures for companies facing financial difficulties as a result of the COVID 19 pandemic were:

Today (16 June 2021) the UK governmentannounced a further extension of some (but not all) of the temporary measures first introduced by the Corporate Governance and Insolvency Act 2020 (CIGA) in June last year.

The two most significant temporary measures for companies facing financial difficulties as a result of the COVID-19 pandemic were:

There has been much debate in recent years around the use made of certain UK restructuring tools – the company voluntary arrangement and, more recently, the new restructuring plan – to restructure commercial property leases. Commercial tenants argue that compromise is necessary to address high fixed costs that are no longer sustainable, but landlords have often been critical of the approach taken. This debate has become more acute in the context of the pandemic, as many High Street businesses subject to mandatory closure have built up significant rent arrears that need to be addressed.

As Covid-19 restrictions in the UK gradually come to an end, the need for distressed tenants to be able to reorganise their liabilities to efficiently deal with the pandemic’s impact upon their balance sheets is likely to result in a number looking to use restructuring plans and CVAs.

Thankfully, a trio of significant recent cases, New Look1, Virgin Active2 and Regis3, have provided helpful and timely guidance regarding the use of such processes.

When finances become distressed, creditors examine all avenues to recover their debt which can result in any intercreditor agreements being thrown into the spotlight. The recent judgment of Re Arboretum Devon is another helpful reminder to lenders entering into an intercreditor agreement (ICA) that these should be drafted with the worst-case scenario in mind and using the clearest language in order to avoid disputes arising at the time of enforcement.