The COVID-19 pandemic is also keeping legislators on their toes, who are continuing to try to mitigate the impact of the pandemic on the economy. The focus was initially on the temporary suspension of the obligation to file for insolvency by the COVID-19 Insolvency Suspension Act (COVInsAG). Following on from this, with the Act on the Further Development of Restructuring and Insolvency Law (SanInsFoG), which came into force on 1 January 2021, the legislator has further modified obligations of conduct and, correspondingly, the liability of managing directors in the crisis of the company.
On 22 October 2020, the UAE government made various changes to the UAE Bankruptcy Law*, including the concept of Emergency Financial Crisis (EFC). Subsequently, on 10 January 2021, the UAE Cabinet declared the existence of an EFC in the UAE. In this article, Partners Michael Morris and Keith Hutchison explore how this declaration may impact on debtors and creditors.
Emergency Financial Crisis
One of the key changes implemented was a power given to the UAE Cabinet to declare an EFC. An EFC is defined as:
The emergence of a new, more infectious, Covid-19 variant and the imposition of ever more severe lockdowns extends the downside risk on the IMF’s recent outlook for the global economy and its warning of a ‘long, uneven road to recovery’.
The COVID-19 pandemic has brought disruption and economic hardship to several businesses around the globe. In Brazil, the effects of lockdown and restriction measures by the Governments have caused numerous companies to file for bankruptcy or judicial reorganisation, the latter being the legal restructuring instrument which aims to assist companies to continue their activities and avoid becoming bankrupt.
Relevant Aspects of the Judicial Reorganisation process
The Corporate Insolvency and Governance Act 2020 (‘CIGA’) came into force in June 2020 and introduced significant reforms to the insolvency law of England and Wales. This article explores the temporary measures introduced by CIGA, with a particular focus on what they mean for creditors looking to recover bad debts and offers a possible solution for creditors with claims which, in current challenging times, may be written off as disproportionately costly to take forward.
Limited debt recovery options and enforcement rights until (at least) 31 December 2020
When a business is distressed and is due to run out of cash, advisors are often called upon to carry out an accelerated M&A process. Whilst there may be scope for the process to be run on a solvent (share sale) basis, it may need to be implemented on an assets basis, often via a formal insolvency process. Because of the undeniable threat of insolvency, directors of distressed businesses should obtain specialist legal advice on their duties at the earliest possible stage.
Board considerations
Imagine that IPs have been appointed as administrators of an aerospace engineering company that operates around the world. The company was financially stressed before the COVID-19 pandemic and then sales dried up. With no reasonable prospect in sight, the directors filed for administration and questions have since been raised about how the directors conducted the company’s affairs shortly before it entered administration.
The temporary measure allowing companies and other qualifying bodies to hold AGMs virtually will be extended until 30 December 2020. The measure, which was introduced as part of the UK Government's response to the COVID-19 pandemic, had been due to expire on 30 September 2020.
One of the first questions we are often asked by buyers in distressed M&A situations is what is the likely quantum of employee liabilities? It is not uncommon for buyers to want to restructure the workforce post-completion and early engagement on this issue is key.
Transaction structure and its impact on employment
On 30 July 2020, the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) came into operation. The IRDA is an omnibus legislation housing all of Singapore’s insolvency and restructuring laws in one single piece of legislation.
The general framework of the IRDA has been discussed in the first article in our series of articles covering the various aspects of IRDA and can be found here.