The U.K. government has announced a series of measures intended to support businesses impacted by coronavirus/COVID-19, including suspension of the wrongful trading regime, a job-retention scheme and a temporary ban on the eviction of commercial tenants.
Suspension of Wrongful Trading Regime
French courts are closed for the unknown duration of the COVID-19 lockdown. Businesses facing immediate difficulties may still file for emergency or restructuring proceedings. Filings must be made electronically and hearings will be conducted remotely.
Court Closures
On Saturday 28 March, Secretary of State for the Business, Energy and Industrial Strategy, Alok Sharma, announced a proposal for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.
Wrongful Trading (section 214 Insolvency Act 1986)
It was announced that there would be a temporary suspension of section 214 Insolvency Act 1986 in relation to wrongful trading.
In 2019, the increased wave of distressed health care companies continued, and with downward pressure on reimbursement rates, regulatory changes, decreased occupancy rates and technological advances, this trend is unlikely to subside in 2020.
Health care providers often are heavily dependent on revenues from government programs such as Medicare and Medicaid, accounting for nearly 40% of national health care spending in 2018. Therefore, a Medicare payment suspension could cripple a health care provider.
The global coronavirus (COVID-19) crisis continues to have a devastating impact across all segments of the entertainment industry.
Sky News reports today that the Insolvency Service is considering reforms to insolvency laws which may include a moratorium on winding up petitions against companies and the suspension of rules on wrongful trading.
The question is no longer whether the volatility created by the COVID-19 pandemic will deepen the difficulties businesses and other institutions face in the coming months, but by how much and in what ways. In the past few weeks, we have offered client mailings and webinars on COVID-19-related topics, and we will work to keep you informed of important developments as these issues evolve. Included below are updates to our recent commentary, with answers to questions we have been receiving.
Corporate
Impact of COVID-19 on M&A
Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.
Re System Building Services Group Limited [2020] EWHC 54 (Ch)
Summary
A recent High Court ruling has considered the character and extent of directors’ duties in the context of insolvency.
In System Building Services, Insolvency and Companies Court Judge Barber (“ICCJ Barber”) considered, amongst other things, the nature of a director’s duties to a company and whether those duties survive the company’s entry into an insolvency process.