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.
COVID-19 Key Developments __ Top Story | COVID-19:Temporary amendments to insolvency laws extended to 31 December 2020 On 7 September The Treasurer and the Attorney General issued a joint statement announcing that the government plans to extend temporary insolvency and bankruptcy protections for businesses impacted by the COVID-19 pandemic until 31 December 2020. MinterEllison's Michael Hughes has released an article providing an expert summary of the changes. This can be accessed on our website here.
On 7 September 2020, the federal government announced that the temporary changes to the creditors' statutory demand and insolvent trading laws have been extended to 31 December 2020.
Key takeouts
In March 2020, the Commonwealth Government's early responses to the economic consequences of the COVID-19 included temporarily suspending and changing important elements of Australia's insolvency laws. These temporary changes were due to expire on 25 September 2020. The government has now announced that this period will be extended to 31 December 2020.
The Government has implemented significant temporary measures to ensure that our insolvency laws and processes do not expose companies and individuals to undue risk. This will hopefully avoid a potentially unprecedented wave of insolvencies.
Key takeouts
The Government announced a six month suspension of insolvent trading laws.
The relevant debts will still be due and payable by the company in the normal way.
Egregious cases of dishonesty and fraud will still be subject to criminal penalties.
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.
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 Federal Budget update focused on Australia's economic position and the impact of the Government's response to COVID-19 and the 2019 – 20 Bushfires. Though no new measures were specifically announced, there were some additional items for certain existing programmes.
Key forecasted Budget figures
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.