As the COVID-19 pandemic continues to cause significant disruptions in the US and global economy, it is likely that US companies experiencing financial difficulties will seek to restructure their debts and other obligations. In anticipation of such restructurings, this article provides a brief overview of voluntary restructurings in the US for non-US parties with investments in or commercial relationships with US companies.
In recent years, there has been an increased interest in obtaining third-party funding to commence legal proceedings. The insolvency sector in particular has seen an increase in applications to court for approval of third-party funding agreements. In this article, we discuss how an insolvent entity may seek approval from the court for third-party funding to pursue legitimate claims.
Third-party funding an important resource for insolvent companies
The Irish Government has published the General Scheme of a Bill and related secondary legislation to address practical issues that have arisen for companies and cooperative societies as a result of the Covid-19 pandemic. We examine the scope of the measures and next steps for entities that can avail of its provisions.
Duration of proposed temporary measures
Even before the advent of Covid-19, insolvency-related D&O claims already made up a large part of the management risk landscape.
Corporate insolvencies are on the rise. 2019 saw the highest level of underlying insolvencies since 2013, with the retail, hospitality and construction industries particularly affected. As the ongoing uncertainty of the pandemic further increases the risk that companies will run into financial difficulties, insolvency can only continue to make up a large source of directors’ and officers’ (D&O) claims.
The national lockdown in South Africa has left many companies financially distressed and unable to meet their contractual obligations. Looming on the landlord’s horizon may well be its approach to tenants who are placed under business rescue.
For many companies facing financial stress, restructuring liabilities is the only way for their business to survive. Consensual restructuring, or voluntary workout, requires agreement from creditors to reorganise the company’s liabilities, and is typically implemented by agreement between the company and its creditors. Court-based restructuring processes, on the other hand, involve at least some degree of legal coercion of creditors to vary or release liabilities.
Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the leisure, travel/tourism, retail and hospitality sectors. These sectors will face longer term challenges due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer. However, these are not the only sectors that will suffer.
Days ago a lawyer's answer to these questions would have been the all too often heard "well, it depends". There would have been a serious risk of any such adjudication being stopped by the court granting a mandatory injunction to halt it. Ask the same questions again now and the response would be a resounding "yes and yes!"
The High Court recently refused to grant an order sought by a Revenue-appointed liquidator, requiring Google Ireland to provide him with access to a private Gmail account. The Gmail account in question was believed to have been operated by the liquidated company. For their part, Google strongly resisted the liquidator’s application, citing concerns over protecting the privacy of individuals. It argued that the liquidator was seeking access to the entirety of the Gmail account which could contain diary entries and photographs as well as emails.
It is imperative that companies in financial distress prioritise their continued existence and consider business rescue as an alternative to liquidation. One of the major advantages of the business rescue process is the moratorium (stay) on legal proceedings which aims to give financially distressed companies sufficient breathing space to trade out of its insolvency. A temporary moratorium automatically comes into operation upon the filing of a resolution placing the company into business rescue or the issuing of an application for an order to this effect.