The Government has announced they will be relaxing the law for companies undergoing a rescue or restructure process, giving them breathing space that could help avoid insolvency. 

COVID-19 is an unexpected shock for many businesses. Some businesses are being significantly affected, particularly those in the travel and hospitality sectors. We consider some of the options open to otherwise good businesses facing cash-flow and other financial issues as a result of COVID-19.

How are governments dealing with COVID-19

Entrepreneurs’ Relief – review and reform

Entrepreneurs that sell their businesses have been able to take advantage of Entrepreneurs’ Relief since 2008. It currently allows individuals to pay only 10% Capital Gains Tax on all gains on the sale of qualifying assets up to a lifetime allowance of £10m.

The Conservative Manifesto said that ER would be subject to “review and reform”. There is increasing speculation that changes will be introduced at the Budget in March.

We consider one case illustrating the efficiency of international insolvency proceedings commenced in Ireland, improvements to the efficiency of the appellate courts and one imminent legislative change, which will impose an administrative burden on the holders of security over book debts.

Ireland as an efficient venue for international insolvency

This decision by the TCC provides further consideration of the right of a company in liquidation to refer a dispute to adjudication. It follows the earlier Court of Appeal decision in Bresco Electrical services Limited (in liquidation) v Michael J Lonsdale (Electrical) Ltd (“Bresco”) which we considered in an article earlier this year.

The facts

The Personal Insolvency Act 2012 was enacted with the aim of throwing a lifeline to debtors, many of whom may be in arrears on mortgage loans secured against their principal private residence.

“To achieve great things, two things are needed: a plan, and not quite enough time.” – Leonard Bernstein

To paraphrase, great things happen when there is a plan and a deadline.

Examinership is one of Ireland’s key rescue processes for insolvent companies. It has been used successfully in very many cases since its introduction almost 20 years ago.

Crucially, it encompasses a deadline with no flexibility.

100 days

Less than an hour after an oxygen tank exploded on Apollo 13, mission control told the crew to isolate a small tank, containing 3.9 pounds of oxygen.^[1] Days later, that tank provided the oxygen to keep the crew alive while landing back on Earth.

If they had left that tank for even another hour the oxygen in it would have been almost gone.

The recent publication of the Courts Service Annual Report 2018 highlighted on-going economic and societal changes by way of hard data. In his Foreword to the Report, Chief Justice Frank Clarke references our digital age, noting that “people are used to round-the-clock online access to services”. He adds that the courts “must deal with the twin challenge of facilitating such access while at the same time ensuring that the court process is secure and that cases are allocated the time and consideration they require”.

The default setting for the hearing of many contested debt recovery and security enforcement cases is by way of affidavit evidence, particularly in the High Court[1]. The creditor swears an affidavit setting out the reasons why it maintains the court should rule in its favour. Certain documents can be presented as exhibits that back up its case such as a contract.