Last week, in Re a Company (Application to Restrain Advertisement) [2020] EWHC 1551 (Ch) the High Court restrained the advertisement of a winding up petition on grounds of the impending changes to insolvency legislation, which are intended to have a retrospective effect.
A Supreme Court judgment issued yesterday has overturned a Court of Appeal decision heavily limiting the ability of insolvency practitioners to commence and enforce adjudication proceedings against their creditors. The court’s decision allows much greater flexibility in the use of adjudication for the administration of construction insolvencies, however some uncertainty remains over the basis on which decisions obtained in such adjudications will be permitted to be enforced against creditors.
In a case that is sure to keep lawyers talking for months, the Supreme Court has decided the important case of Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd.
The case concerns the relationship between the statutory adjudication and insolvency set-off regimes.
The webinar looked at the widely debated issue of whether a company in liquidation can commence an adjudication by examining three recent cases on this topic.
Bresco v Michael J Lonsdale
The first being the Court of Appeal decision in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27, which has recently been heard in the Supreme Court but whose judgment is awaited.
Background
The Corporate Insolvency and Governance Bill is currently being fast-tracked through Parliament, but is the Government making a mistake in seeking to combine a short-term breathing space for businesses during the current Covid-19 crisis with introducing the greatest changes we have seen to UK insolvency laws for decades?
The government recently published its Corporate Insolvency and Governance Bill which includes a temporary “ban” on statutory demands. In its current form, the ban will prevent landlords and other creditors from relying on statutory demands served between 1 March and 1 month after the Bill becomes law. The Bill also includes provision to prevent the winding up of companies where their inability to pay is due to Covid 19.
Whilst the government has taken significant steps to help protect businesses from collapsing as a result of the current pandemic, it is evident that companies across the board are acutely aware that such protection cannot last forever.
We now have further evidence of the court's willingness to act within the spirit of the Corporate Insolvency & Governance Bill ("CIG Bill").
In a bid to assist struggling companies amid the uncertainty brought on by the pandemic, Hungary issued Government Decree No. 249/2020, which amends the Bankruptcy Code and gives companies breathing space while they explore options for rescue.
The changes created by the decree, which came into force on 29 May 2020, will be in effect only during the state of the emergency and include the following:
Under English law, there is no common law right to terminate a contract on a counterparty’s insolvency. As a result, in all well-drafted commercial contracts it common to see a contractual right to terminate on the event of a party’s insolvency.