The UK Government announced on Saturday 28 March 2020 that it intends to amend UK insolvency law to suspend the offence of wrongful trading by directors of UK companies and to give UK companies the breathing space to allow them to keep trading while they explore options for rescue.
Background
Current insolvency rules stipulate that directors of limited liability companies can become personally liable for business debts if they continue to trade when uncertain about whether their businesses can continue to meet their debts. These rules will be suspended.
Due to the COVID 19 pandemic (hereafter, “COVID-19”), the closure of numerous shops and other businesses has been ordered by the authorities. Other shops and businesses are suffering losses in sales, some of them severe. As a result, many tenants will find themselves in an economic predicament and will be unable to pay their rent, at least temporarily. The question has therefore already been raised several times as to whether tenants are still obliged to pay rent during the current situation.
As the economic turbulence associated with the downturn in commodity prices and the outbreak of COVID-19 continues, many energy companies may find their debt trading at significant discounts. For companies trying to manage liability and liquidity, this presents an opportunity to selectively repurchase debt and de-lever at prices well below par. Energy companies that are well-situated to capitalize on this window should carefully consider the corporate and tax ramifications debt buybacks present.
Corporate Considerations
As the U.S. energy industry comes to grips with the most dire economic crisis in its history, wrought by an invisible virus and global oil price war, and with many exploration and production (E&P) producers substantially adjusting their capital and maintenance budgets, all parties must carefully assess their partners’ financial positions. The bankruptcy filing of a joint venture partner (whether operator or nonoperator) can lead to substantial problems for the other joint venture partner(s) and potentially hamstring operations on the co-owned lands.
*This information is accurate as of 9.00 am Wednesday 25 March 2020 and is subject to change as this situation evolves.
A tenant's solvency, or its risk of insolvency, is not a novel concern for landlords and tenants alike. But the unprecedented COVID-19 pandemic is putting corporate tenant solvency risk into the hot spotlight arguably like never before, and for good reason.
The German federal government is currently preparing new legislation to reduce the economic fallout from the COVID-19 pandemic. This news alert deals with the proposed changes to the insolvency and restructuring related German regulations.
In an unprecedented move the Federal Government has announced temporary changes to some aspects of existing insolvency laws as part of the plan to try and keep businesses operating during this unique health crisis time.
Insolvent Trading
“In this world nothing can be said to be certain, except death and taxes.” - Benjamin Franklin
Summary and Key Takeaways