The government’s monthly insolvency statistics for June 2022 paint a picture of an economy that is still struggling to return to pre-pandemic profitability. Company insolvencies were 40% higher than for the same period last year and 15% higher than in June 2019 (i.e. pre-pandemic levels), with the increased level of insolvencies being largely driven by the higher number of creditors’ voluntary liquidations.

Having trouble reading this email? View it in your browser August 2022 SHARE THIS In this edition of Restructuring Watch, we reflect on: • The first restructuring plan to cram down HMRC. • Recent government reports on certain UK restructuring processes and learnings from the first six-months of the National Security and Investment Act 2021. • Government consultations on a crypto special administration regime and prospective additions to the cross-border recognition and insolvency framework. • A reminder of the recent important milestone in the Galapagos cross-border insolvency battle.

Anyone working in financial services will be aware of the requirement for individuals carrying out regulated roles to be "fit and proper". Clearly this is going to include solid personal finances and demonstrable honesty and integrity. The EAT decided that an estate agent who was dismissed because he became bankrupt and did not tell his employer was fairly dismissed.

On 22 July 2022, judgment was handed down in relation to the sanction of the first Part 26A restructuring plan to be proposed by a small–medium enterprise (SME) in Re Houst Limited [2022] EWHC 1941 (Ch). The restructuring plan (RP) procedure set out in Part 26A of the Companies Act 2006 (CA 2006) has been widely considered to be out of the reach of SMEs due to excessive cost. The decision is also an interesting one for other reasons, notably the cram-down of HMRC as a dissenting creditor.

Today’s insolvency statistics contained few surprises, creditors’ voluntary liquidations (CVLs) have continued to outnumber other types of company insolvencies by some margin and have distorted the overall picture, which is that (putting aside CVLs where directors/shareholders elect to pull the plug themselves on a company’s survival) figures for other types of company insolvencies remain below pre-pandemic figures.

For those who missed it the Insolvency Service published an excellent research report at the end of June which focuses on the treatment of landlords in company voluntary arrangements (CVAs). This was against the backdrop of a large number of "landlord" CVAs in recent years – particularly in the retail and casual dining sectors – where landlords have often complained that they have been unfairly treated compared to other compromised creditors. The report concludes that landlords are, broadly speaking, equitably treated compared to other classes of unsecured creditors.

The Insolvency Service has published a consultation on the implementation of two UNCITRAL "model laws" relating to insolvency: the Model Law on Recognition and Enforcement of Insolvency-Related Judgments (MLIJ), and the Model Law on Enterprise Group Insolvency (MLEG). The UK has already enacted legislation based on the Model Law on Cross-Border Insolvency, in the form of the Cross-Border Insolvency Regulations 2006 (CBIR).

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, commonly referred to as the "Breathing Space Regulations", came into force on 4 May 2021. The Regulations provide eligible individuals with problem debt a period of protection from their creditors known as a "breathing space moratorium".

What effect will government proposals have on insurers, policyholders and other stakeholders?

On 30 June 2022, the English court handed down judgment and made a winding-up order in respect of Galapagos S.A., marking an important milestone in an almost three-year cross-border insolvency battle involving the English, German and European courts.

The decision also provides helpful guidance on the application of the Recast European Insolvency Regulation post-Brexit, as well as the extent to which pre-Brexit jurisprudence should still be considered retained in, or relevant to, English law.

Galapagos: The Facts