When one party can unilaterally prevent a bankruptcy filing – action steps and best practices

Commodities Alert

Restructuring Alert

Winter is here, with the attendant risk of another major weather event impacting the energy production industry, and, specifically, the wind power generation industry in Texas. Last year, Winter Storm Uri significantly disrupted the Texas power grid and forced several energy originators, distributors, and buyers to consider restructuring alternatives.

Over the last 6 months, the Debt Recovery team has seen an increase in their monitoring of debtor companies and notification for proposals for striking off action. The team are actively reviewing and objecting to any such proposals with Companies House to allow their clients to continue to chase their debts.

In August 2021 the Italian government, led by Mario Draghi, enacted a Law Decree (no. 118) to issue “urgent measures to deal with companies’ and entrepreneurs’ crises and subsequent restructuring and other urgent measures for the justice system.” On October 23, 2021, the Law Decree no. 118 was converted into Law no. 147/2021 (Law 147). The new tools introduced by Law 147 have been put in place to deal with entrepreneurs in crises that need an urgent turnaround, including during the ongoing COVID-19 emergency.

The full written judgment of Sir Alastair Norris in respect of the sanction of the Part 26A restructuring plan for Amicus Finance PLC (in administration) was belatedly handed down last week. As we reported in August (linked here), Amicus is the first company in administration to implement a Part 26A restructuring plan, which was fiercely contested by one of the creditors of the Group, Crowdstacker.

IN THE NEWS

Government lifts (in part) the temporary insolvency measures

On 9 September 2021, the government announced that the temporary restrictions introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) which were put in place to protect companies during the pandemic are being lifted, and will be replaced from 1 October 2021 with new temporary measures, which include the introduction of a temporary revised debt limit for presenting winding up petitions.

What have we been up to?

Aside from our collective (but not wholly unexpected) disappointment that the lifting of the remaining Covid restrictions has been pushed back to 19 July, the team continue to advise on a wide range of insolvency related matters, amongst the recent highlights being:

The UK Government has announced changes to the regime for winding-up petitions. With effect from 1 October 2021, some of the protections currently afforded to businesses against aggressive debt recovery action are being phased out.

The changes are intended to avoid a 'cliff edge' for debtor companies when the current measures lapse at the end of September 2021, and have a tapering effect to avoid the flood of winding-up petitions that might otherwise be expected.

What are the current restrictions (in place until 30 September 2021)?

From 1 October 2021, those restrictions will be replaced by new measures brought about under the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10 Regulations 2021) (the “Regulations”).

Under the Regulations, which are to be temporary and due to last until 31 March 2022, a creditor will be able to present a winding up petition against a corporate debtor where:-

(i) The debt is for a liquidated amount, which has fallen due and is not an ‘excluded debt’ (see below) (Condition A)

The Government has announced that it will be bringing an end (of sorts) to the temporary restrictions surrounding a creditor’s ability to present a statutory demand and winding up petition against a corporate debtor. Those restrictions, which were introduced under the Corporate Insolvency and Governance Act 2020 in a response to the Covid 19 pandemic, have been in place since June 2020 and were set to expire on 30 September 2021.