The Office of the Director of Corporate Enforcement (ODCE) has provided guidance on its approach to directors of companies, made insolvent by the COVID-19 pandemic, who act in good faith on objective evidence in trying to rebuild their businesses.

The issue

The consequences of the COVID-19 crisis have made many businesses that were solvent, and will likely become solvent again, technically insolvent.

Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the hospitality sector where longer term challenges may be encountered due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer.

It is imperative that companies in financial distress prioritise their continued existence and consider business rescue as an alternative to liquidation. Business rescue is a robust procedure that allows South African companies in financial distress or trading in insolvent circumstances to file for business rescue and with the assistance of a business rescue practitioner, reorganise and restructure the business with the aim of returning it to a more stable and profitable entity.

The UK Government has finally set out details of the proposed measures to temporarily restrict the use of statutory demands and winding up petitions during the worst of the COIVD-19 pandemic

The Covid-19 pandemic has had a devastating impact on the South African economy with several enterprises struggling to remain profitable. Their continued operation remains threatened by the imposition of trade restrictions pursuant to the national lockdown and South Africa’s subsequent economic downgrade to junk status.

The COVID-19 (Temporary Measures) Act (the Act) will have a considerable impact on the enforcement of certain contracts and commercial disputes in Singapore for the next 6 to 12 months. The Act was passed by the Singapore Parliament, and commenced on the same day, 7 April 2020.

The key measures of the Act are:

The Act is meant to give temporary relief to financially distressed individuals, firms and businesses who are facing challenges imposed by COVID-19 but who are otherwise viable and profitable.

It is unsurprising that many of the Act’s sections expressly refer to the relevant provisions of the personal and corporate insolvency legislation applicable in Singapore. In this regard, it is noteworthy that the Act refers expressly to the Insolvency, Restructuring and Dissolution Act (“IRDA”). This warrants some explanation.

Whilst no further action has, as yet, been taken to implement the foreshadowed changes to insolvency law in England and Wales (see our comments on the same), the Business and Property Courts of England and Wales ("BPC") have moved quickly to release a temporary Practice Direction on insolvency proceedings ("TIPD").

As the prevalence of COVID-19 continues to grow worldwide, together with the resulting social and business restrictions, the inevitable fallout will be a failure to achieve business plans and an increase in business insolvencies.

The UK Chancellor, Rishi Sunak, stated whilst unveiling recent plans for a £330bn economic boost in light of the pandemic, “this is an economic emergency. Never in peacetime have we faced an economic fight like this one".

Irish companies are facing challenges with the sudden changes imposed on their businesses as a result of the impact of COVID-19. Some may be experiencing cash flow difficulties; others may have had to temporarily cease trading altogether.

Directors are responsible for managing their company’s affairs. This requires them to identify and navigate risks, and to ensure that appropriate strategies and where necessary contingencies are in place to anticipate and deal with such risks.