Global outlook
Impact on businesses
Managing insolvency risks
Considerations for companies and directors
Consequences for lenders
The outbreak of coronavirus COVID-19 represents one of the most significant global public health crises in recent memory and is causing major disruption and unprecedented volatility in markets, economies and businesses. With such great social and economic uncertainty, it is inevitable that existing financial arrangements will be affected and asset-based lenders (ABLs) are not immune to this. They are, however, uniquely positioned – given the flexibility of the products they offer – to react to the ever-changing economic landscape.
Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
The Australian Government has passed the "Coronavirus Economic Response Package Omnibus Bill 2020". The new legislation was announced on Sunday 22 March 2020 and was fast tracked through parliament as part of the Australian Government's response to the economic impact of COVID-19.
While the impact of the coronavirus disease (COVID-19) is as of yet uncertain, one thing is clear: the global outbreak of COVID-19 has caused − and will likely continue to cause − a precipitous decrease in demand and supply as a result of quarantine orders, business closures, and social distancing, all aimed at flattening the curve of the pandemic. As a result, a dramatic and pronounced economic downturn is predicted as the pandemic’s impact touches virtually all businesses, regardless of geography or industry.
This briefing looks at the potential impact of the coronavirus COVID-19 on businesses and examines steps that can be taken by stakeholders and directors to recognise, manage and mitigate the risks. In particular, we look at: the potential impact on businesses; managing insolvency risk; considerations for directors; and considerations for lenders.
Global outlook for the coronavirus situation
On January 17, 2020, Justice Romaine of the Alberta Court of Queen’s Bench found that the Alberta Securities Commission’s (the “ASC”) administrative penalties against Theodor Hennig (“Hennig”) survived Hennig’s discharge in bankruptcy. This decision marks the first time a Canadian court has considered securities regulatory penalties within the context of subsection 178(1) of the Bankruptcy and Insolvency Act (the “BIA”).
The recent English judgment of System Building Services Group Limited¹ is an important decision for directors of offshore companies in 'soft touch' provisional liquidation, and highlights the importance of conducting a thorough analysis of the order appointing provisional liquidators for the purposes of ascertaining the scope of directors’ duties that apply during the course of their post-appointment restructuring efforts.
Commercial bankruptcy practice in the United States is governed by Chapter 11 of title 11 of the United States Code. The focus of Chapter 11 is assisting a distressed company to reorganize its debts to emerge as a going concern or liquidate its assets as part of an orderly wind-down. In this article, we highlight the key benefits available to a Chapter 11 debtor and describe the various stages of a case, including statutory requirements, and types of plans.