Following the introduction of the Corporate Insolvency and Governance Bill into Parliament on May 20, 2020, the U.K. government has published a series of guidance notes on the measures proposed in the Bill. The proposed measures, first announced by Secretary of State for Business, Energy and Industrial Strategy on March 28, 2020, are intended to protect companies and businesses facing major funding and operational difficulties in the current COVID-19 pandemic. Once final, the Bill will amend current U.K.

The U.K. Government has published the U.K. Corporate Governance and Insolvency Bill. The Bill amends aspects of insolvency and company law to assist firms struggling to cope with the effects of the COVID-19 pandemic. The measures include: 

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently reversed a bankruptcy court’s disallowance of postpetition interest at the default contract rate, holding that “the bankruptcy court erred in applying a liquidated damages analysis and ruling the default interest rate was an unenforceable penalty,” and also erred in weighing “equitable considerations” to avoid enforcing the contractual default interest rate.

The U.K. Government intends to exempt financial services firms from certain provisions of the new U.K. Corporate Governance and Insolvency Bill. The Bill, announced on March 28, 2020, will amend aspects of the U.K. insolvency regime (as set out under the Insolvency Act 1986) in light of the financial difficulties faced by many businesses as a result of the COVID-19 pandemic. The Bill also includes provisions for companies’ annual general meetings and filing requirements during the COVID-19 crisis.

The Bill’s insolvency-related measures include:

May 2020

How Debtors in Saudi Arabia Can Manage Insolvency Risk Post-Covid-19

IN THIS ISSUE:

Introduction

Who Is Subject to The Bankruptcy Law?

When is a Person "Insolvent" in The Kingdom?

What Are The Options Available to an Insolvent Entity?

Directors' Duties

Can't a Distressed Debtor Just Wind Itself Up Voluntarily?

Statutory Obligations When a Company Becomes or Approaches Insolvency

Role of the Bankruptcy Commission

Role of Bankruptcy Officers

Options When a Company Is Insolvent

GOVERNANCE & SECURITIES LAW FOCUS

Proxima Nova A ExCn 35pt

MAY 2020/LATIN AMERICA

Below is a summary of the main developments in US, EU, and UK corporate governance and securities law since our last update in February 2020.

Financial regulatory developments are available here.

IN THIS ISSUE

The U.S. Court of Appeals for the Eighth Circuit recently affirmed the denial of bankruptcy discharge for a Chapter 7 debtor due to the debtor’s failure to keep adequate records.

In particular, the Eighth Circuit focused on a sudden and financially significant return of hundreds of thousands of dollars’ worth of high-end watches and jewelry that left significant unanswered questions as to the whereabouts of the assets and the legitimacy of the creditor jeweler’s claim.

The outbreak of the novel coronavirus pandemic (COVID-19 or Coronavirus) has had and will continue to have wide-ranging implications for businesses, governments and institutions across markets and industries. Shearman & Sterling (Shearman) has created a dedicated resource hub containing information on the potential impact this pandemic may have on businesses, and what businesses can do to prepare and succeed in this rapidly evolving space going forward. The sections that follow cover select key topics that may be of particular interest at the time of writing.

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently affirmed a bankruptcy court’s holding that the contemporaneous exchange for new value defense to a preference action under § 547(c) applied to a creditor bank that released its liens for less than full payment.

In so ruling, the Eighth Circuit BAP held that the bankruptcy trustee could not recover two of the three payments that the debtor made to the bank during the 90-day pre-petition preference period.

Background

The COVID-19 pandemic has led certain infrastructure businesses to face significant disruptions to operations and revenues, giving rise in many instances to breaches or potential breaches of finance documentation. This article considers at high-level issues to be mindful of when undertaking waiver processes to address such breaches.

Potential Waivers

Financial Covenants