Global outlook
Impact on businesses
Managing insolvency risks
Considerations for companies and directors
Consequences for lenders
Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
This briefing looks at the potential impact of the coronavirus COVID-19 on businesses and examines steps that can be taken by stakeholders and directors to recognise, manage and mitigate the risks. In particular, we look at: the potential impact on businesses; managing insolvency risk; considerations for directors; and considerations for lenders.
Global outlook for the coronavirus situation
The recent English judgment of System Building Services Group Limited¹ is an important decision for directors of offshore companies in 'soft touch' provisional liquidation, and highlights the importance of conducting a thorough analysis of the order appointing provisional liquidators for the purposes of ascertaining the scope of directors’ duties that apply during the course of their post-appointment restructuring efforts.
Alexandra Vinogradova v (1) Elena Vinogradova, (2) Sergey Vinogradov (BVIHCMAP 2018/052)
With the States of Guernsey's approval yesterday of the Companies (Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020 (the "Ordinance"), Guernsey took a step towards further enhancing its reputation as a robust jurisdiction for restructuring and insolvency.
In a last Amerind-tinged gift before Christmas, the High Court has today handed down another judgment on an issue which lies at the intersection between insolvency law and trust law, although this time in the bankruptcy context. It is the latest in a string of unfolding legal developments at this intersection, including the High Court’s decision in June in Amerind and the Full Federal Court’s decision last year in Killarnee.
Just a note to alert readers that the latest decision of interest in this post-Amerind world dropped today in the Federal Court in Queensland. The liquidators of an insolvent corporate trustee successfully obtained orders appointing them receivers of the assets of two trusts to enforce the rights of exoneration and liens of the former trustee. The application was contested by the new trustee of the property trust, who sought to sell the key asset itself (a hotel – freehold title to the land).
If a company becomes insolvent or experiences a liquidity crunch, which necessitates a restructuring or resort to higher-risk financing arrangements, the directors should consider whether to commence formal proceedings to facilitate the restructuring or financing.