As Covid-19 restrictions in the UK gradually come to an end, the need for distressed tenants to be able to reorganise their liabilities to efficiently deal with the pandemic’s impact upon their balance sheets is likely to result in a number looking to use restructuring plans and CVAs.

Thankfully, a trio of significant recent cases, New Look1, Virgin Active2 and Regis3, have provided helpful and timely guidance regarding the use of such processes.

When finances become distressed, creditors examine all avenues to recover their debt which can result in any intercreditor agreements being thrown into the spotlight. The recent judgment of Re Arboretum Devon is another helpful reminder to lenders entering into an intercreditor agreement (ICA) that these should be drafted with the worst-case scenario in mind and using the clearest language in order to avoid disputes arising at the time of enforcement.

Last month, we discussed practical tips for dealing with contractor insolvency as part of our ongoing construction webinar series.

Our colleague, Doug Wass, has already shared three key points to be aware of when a contractor becomes insolvent. In this article we discuss, in more detail, the practical points clients and those administering building contracts on their behalf should consider when contractor insolvency is suspected and occurs.

The recent restructuring of the Norwegian Group by the Irish High Court helpfully clarifies the application of the Cape Town Convention in Irish restructuring. It is also an interesting case study regarding the circumstances in which the Irish courts will restructure a group of companies, which is not headquartered in Ireland.

Three weeks spent entirely at home seemed daunting at the time (little did we know…) and the prospect of wholesale business closures soon gave rise to serious concerns about the potential impact which those closures would have on the wider economy.

Mr. O’Neill held a Buy-Out-Bond (BOB) with a pension provider. The retirement options were standard for such a product; allowing for the purchase of annuity, or investment in an Approved Retirement Fund (ARF) or Approved (Minimum) Retirement Fund (AMRF) as well as providing for taxable and non-taxable lump sum entitlements. Mr. O’Neill denied any entitlement of his official assignee (OA) in bankruptcy in exercising the retirement options provided by his pension where a Bankruptcy Payment Order (BPO) pursuant to s85 of the Bankruptcy Act 1988 (Act) had not been obtained.

With an increased number of businesses experiencing financial difficulties in the current economic climate, lender-led debt restructurings are becoming more prevalent. Such restructurings are commonly achieved by the lender releasing, capitalising or amending its debt, each of which will have tax consequences for the borrower group.

This note sets out a brief summary of some of the key UK tax points to be aware of, and pitfalls to avoid, when undertaking these debt restructurings.

Debt waivers

The Department of Enterprise, Trade and Employment commenced a public consultation process on 8 February 2021, in relation to proposed legislation which will allow for a new restructuring procedure for the rescue of small companies.

It is a basic principle of the law of corporate insolvency that the assets of a company are effectively frozen for the benefit of all of the company’s creditors when a liquidator is appointed. The principle is provided for under Section 602 of the Companies Act 2014. It provides that any disposition of company property, which includes the sale of shares in the company and the charging of company property, that is done without the sanction of the liquidator or a director who has retained the power to do so, will be void unless the court otherwise orders.

Irish landlords to former Monsoon stores in Dublin and Cork have won their High Court claim that their leases with the fashion retailer remained in full force despite the existence of a Company Voluntary Arrangement (CVA) in the UK.

Background

On 3 July 2019, a CVA was approved in the UK by 84 % of Monsoon’s creditors. None of the Dublin or Cork landlords attended the meeting either in person or by proxy.