As shopping centre owner Intu warns it could be forced to shut many of its sites if it can’t resolve its financial issues by tomorrow, 26/06/2020, our real estate and corporate restructuring and advisory experts take another look at what could happen next.

On top of the multiple challenges hitting retail and leisure landlords and occupiers arising from COVID-19, the news that Intu has had to write down the value of its shopping centre portfolio by nearly £2 billion came as further bad news.

The Supreme Court’s decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 (17 June 2020) has been eagerly anticipated.

The appeal raised important questions about the compatibility of adjudication with the operation of insolvency set-off. The Supreme Court allowed the appeal, deciding that a liquidator was entitled to refer an insolvent company’s claims to adjudication where there were cross-claims between the parties.

The facts

In brief

The following measures introduced as a COVID-19 response are now to be extended:

The Corporate Insolvency & Governance Bill is making its way through Parliament at the moment. It introduces a number of new processes the focus of which is to assist in the rescue of companies as a going concern.

The biggest shake-up of English insolvency law for a generation

This summary is based on the provisions of the Bill as drafted at 15 June 2020. It is still subject to change before it becomes law.

New Moratorium process – basic overview 

The Corporate Insolvency and Governance Bill was recently introduced into Parliament. While the effects of some of the changes proposed are intended to be only temporary, they have potential consequences for pension schemes.

Changes of particular relevance are as follows:

• Restrictions on the use of statutory demands for winding up petitions.
• New Moratorium process
• Court approved corporate restructuring plan

The Bill received its second and third readings on 3 June 2020 and will now go to the House of Lords for consideration.

Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.

Under Australia’s insolvency regimes, a distressed company may be subject to voluntary administration, creditor’s voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.

Distressed M&A

Any downturn tends to produce a surge of distressed m&A opportunities, and the current crisis will be no different. Investments in distressed companies follow a different set of rules to "normal" m&A transactions, bringing additional complexity in terms of the stakeholders involved and deal structuring, as well as particular set of challenges for due diligence and buyer protections.

The government has published the Corporate Insolvency and Governance Bill which, if passed, will significantly restrict suppliers’ ability to exit commercial agreements due to restructuring or insolvency-related causes.

That the current pandemic has thrown a curveball at many businesses is a given.

At the end of February, the Bank of Scotland Business Barometer reported that overall business confidence in the UK was at a net balance of 23%. Only two months later and confidence plunged to minus 29%.

In brief

The government has introduced fundamental changes to the procedures for presenting winding-up petitions and making winding-up orders in the Corporate Governance and Insolvency Bill.