Background: Financial Backdrop
The Stats
The Government has published the COVID-19 Response (Further Management Measures) Legislation Bill (the Bill), an omnibus bill containing amendments (both temporary and permanent) to several acts. These amendments aim to both assist organisations in effectively managing the “immediate impacts of the response to COVID-19”, as well as mitigating some of the pandemic’s “unnecessary and potentially longer-term impacts on society”.
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.
High Court provides guidance on voluntary administration and creditors’ meetings under COVID-19 Alert Level 4
A recent decision of the High Court provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.
Christchurch based company Cryptopia Limited (in liquidation) (Cryptopia) operated a cryptocurrency exchange. Account holders were able to deposit cryptocurrencies into the exchange, and carry out trades with each other.
In January 2019 the exchange was hacked and cryptocurrencies valued at approximately NZD30m were stolen. Cryptopia closed after the hack, re-opened for a short period, and was then placed into insolvent liquidation in May 2019. David Ruscoe and Russell Moore of Grant Thornton New Zealand were appointed liquidators.
Finance Minister Grant Robertson yesterday afternoon announced a number of proposed temporary changes to the Companies Act, with the stated purpose to help businesses facing insolvency due to COVID-19 remain viable.
The temporary changes include:
A recent decision of the High Court of New Zealand provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.
On 30 March 2020, the board of directors of EncoreFX (NZ) Limited resolved to appoint administrators to the company. By then, New Zealand was already at Level 4 on the four-level alert system for COVID-19.
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.
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.
Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.