The High Court recently dismissed a landlord creditor's application to overturn a company voluntary arrangement (CVA) initiated by coffee shop chain Caffé Nero. Here, we recap the key facts of the case and summarise the highlights of the High Court's ruling.

The facts

In November 2020, Caffé Nero – hit hard by the COVID-19 pandemic – proposed a CVA to creditors to compromise rent arrears (at 30p in the £1) and reduce future rents for the company's premises.

The German court has published LG München I v. 13.07.2021 - 6 O 17571/20 – the first published ruling on COVInsAG. We unpack the key takeaways from the decision below.

Background

To mitigate the economic effects of the pandemic, the German government passed the COVID-19 Insolvency Suspension Act (COVInsAG) to temporarily suspend the obligation on directors to file for insolvency where the debtor's insolvency was due to the pandemic. The COVInsAG (Section 2(1) Nos.2 and 4) also suspends large parts of the rules on insolvency avoidance.

On 29 October 2021, the UK Insolvency Service published its insolvency statistics for Q3 2021. Notably, the number of company insolvencies was 17% higher than in Q2 2021 and 43% higher than in Q3 2020. This was driven by an increase in company voluntary liquidations (CVLs) to the highest quarterly level for 12 years.

It’s autumn and time to put that box-set viewing on pause and perhaps instead review the likely direction of travel of the “zombie” army of distressed businesses. How do you avoid contagion?

Unless you hibernated during the various lockdowns you will not have failed to notice that the impact of Brexit, the Covid-19 pandemic, and lockdown measures took their toll on spending, incomes and jobs, tipping the UK economy into recession after negative growth in the first two quarters of 2020.

The coronavirus pandemic posed a significant challenge to the financial health of businesses across the UK. A sector additionally at the mercy of the markets following the easing of lockdown restrictions is the energy industry, with the wholesale price of natural gas (measured on a pence per therm basis) having risen dramatically from around 50p/therm in January 2021 to over 200p/therm during the first few weeks of October 2021.

UK REIT Horizon Scanner Q4 2021

UK REIT Horizon Scanner Q4 2021

Key Issues

Key issues coming up for UK Main Market REITs in corporate, financial regulatory, planning, real estate, securities law and regulation and tax1 in England (including retained EU law2).

Issue/status/timing: New developments since our March 2021 edition are shown in green text. Impact: urgency/impact rating for REITs admitted to London Stock Exchange Main Market (including the Specialist Fund Segment3)

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (the Bill) is, at the time of writing, at second reading stage in the House of Lords and progressing quickly towards becoming law later this year.

In a recent ruling, the Austrian Supreme Court has defined de facto managing directors and their obligations and liabilities in connection to wrongful trading.

The decision

The key takeaways from the ruling are:

The German Act on the Stabilisation and Restructuring Framework for Business (StaRUG) came into force on 1 January 2021, incorporating the EU Restructuring Directive into German law. It provides the first pre-insolvency restructuring framework for the reorganisation of companies facing "imminent illiquidity" and the possibility of involving dissenting creditors. The restructuring plan – which is very similar to the English Scheme of Arrangement and the German insolvency plan – is the central instrument.

Section 1 StaRUG

The UK government has lifted the current restrictions on statutory demands but imposed new temporary requirements for winding-up petitions presented from 1 October 2021 until 31 March 2022. The measures aim to protect companies from aggressive creditor enforcement as the economy opens up and other protections are lifted.

New requirements