Under English law, there is no common law right to terminate a contract on a counterparty’s insolvency. As a result, in all well-drafted commercial contracts it common to see a contractual right to terminate on the event of a party’s insolvency.
Key Notes:
Key Notes:
The Government has announced proposals for retrospective changes for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.
Wrongful trading
These changes will include a temporary suspension (to the end of June 2020) of section 214 Insolvency Act 1986 in relation to wrongful trading, subject to passage of the upcoming Corporate Insolvency & Governance Bill through Parliament in the coming weeks.
Background: Financial Backdrop
The Stats
In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. Today’s update includes new information for many countries as indicated in the chart: Global Government Measures Taken in Response to COVID-19.
The restructuring and recovery profession is seeking to quickly adapt to the economic strain and disruption presented by the COVID-19 pandemic. Whilst new restructuring procedures may soon be introduced to provide distressed companies with protection, the industry has been encouraged to innovate with the tools it already has. One possible option that is developing is the concept of “light touch” administrations. The extent of the “light touch” and the suitability of the option will depend on each scenario.
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.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a roughly $2 trillion coronavirus response bill signed into law yesterday, is intended to provide widespread emergency relief for Americans and the country’s economy. In addition to its benefits for individuals, the bill provides aid for small businesses, large corporations, hospitals and public health agencies, and state and local governments.
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.