On 20 May 2020, the Government introduced the Corporate Insolvency and Governance Bill in Parliament. The Bill is a much awaited development following the Secretary of State for Business, Energy and Industrial Strategy’s statement on 28 March 2020 announcing key measures to help businesses address the challenges resulting from the impact of coronavirus.
Financial services firms subject to special insolvency regimes supervised by the FCA, PRA, and other financial services regulators have been largely excluded by the Bill.
The Corporate Insolvency and Governance Bill was finally introduced to Parliament on 20 May. It is now clear that the provisions of the Bill relating to statutory demands and winding up petitions will apply to Scotland without the need for the Scottish Government to pass further legislation.
Statutory demands
In our recent update on AGMs, we mentioned that the Government is due to pass legislation giving companies increased flexibility for holding Annual General Meetings, amongst other measures to help businesses through the COVID-19 situation.
The interaction between the principles of insolvency law and the Coronavirus Job Retention Scheme (JRS) have come into sharp focus in recent weeks, with the administrators of Carluccio's and Debenhams seeking guidance from the English courts about how the scheme impacts on their obligations to employees.
The Corporate Insolvency and Governance Bill (the “Bill”) has been laid before the UK Parliament today, Wednesday 20 May 2020.
The Bill, if passed, will implement some significant changes to UK insolvency law and at the same time effect a range of temporary measures to assist with corporate governance during the Covid-19 situation.
Moratorium for protection from creditors
The Coronavirus (Scotland) (No.2) Bill (the “Bill”) has been introduced by the Scottish Parliament today, 11 May 2020. The aim of the Bill is to respond to the financial impact the COVID-19 pandemic is having on individuals and small businesses (by that Scottish Ministers mean sole traders, not companies incorporated under the Companies Act 2006).
As part of its response to the COVID-19 situation, Companies House has announced that it will accept the filing of statutory insolvency documents via emailed PDF attachments.
This measure applies to companies registered in Scotland, as well as England & Wales and is yet another practical example of the steps being taken to try and alleviate the administrative burden on insolvency practitioners.
It is perhaps not as well-known as it should be that the Bankruptcy (Scotland) Act 2016 sections 195 – 198 provides a six-week moratorium – effectively a postponement or period of protection from action to recover debts - to individuals, partnerships and trusts facing financial distress or liquidity issues.
The moratorium provides breathing space to allow parties to be protected from their creditors while they take advice and consider what debt relief options might be available to them.
A party can normally apply for the moratorium once in any 12-month period.
Fraser Turner Limited v PricewaterhouseCoopers LLP and others [2019] EWCA Civ 1290
The Court of Appeal has upheld a decision striking out claims against administrators which alleged that they owed a duty to a specific creditor and were guilty of misfeasance.
Fraser Turner Limited (FT) was party to an agreement (“Royalty Agreement”) with London Mining plc (“LM”) and London Mining Company Ltd (“LMCL”) which provided for FT to receive a royalty in respect of iron ore produced at the Marampa mine. LMCL was a wholly owned subsidiary of LM.
The Financial Conduct Authority, the Information Commissioner’s Office and the Financial Services Compensation Scheme have issued a joint statement warning insolvency practitioners to be careful when handling personal data.
The Joint Statement says that the FCA, ICO and FSCS are aware that some IPs and FCA - authorised firms have attempted to sell clients’ personal data to claims management companies, where it is likely claims for compensation will be made to the FSCS.