When a business becomes insolvent, all of the creditors of the business are at risk, including its landlords. As COVID-19 continues to challenge businesses in Ireland and abroad, two recent decisions of Mr Justice McDonald in the High Court offer a timely reminder of the standards which tenants must meet when seeking to compromise their commercial lease obligations and the importance of procedural fairness for landlords affected by tenant insolvency.

The New Look case¹

In the second part of our coverage of the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the Act), we consider amendments made to certain insolvency provisions of the Companies Act 2014 (the 2014 Act). All of these measures apply for an "interim period", expiring on 31 December 2020 (unless extended by Government).

Dividends

On 21 July 2020 the Irish High Court approved a scheme of arrangement for the world's largest regional aircraft lessor Nordic Aviation Capital DAC (Nordic).

The scheme, which included a 12-month standstill and deferral of c. US$5 billion of secured and unsecured debt, was a market-first for the aircraft leasing industry and has been watched closely by others in the sector.

The Irish scheme had a number of innovative features:

On 21 July 2020, the Irish High Court approved a scheme of arrangement for the world’s largest regional aircraft lessor Nordic Aviation Capital DAC (NAC).

The scheme, which included a 12-month standstill and deferral of c. US$5bn of secured and unsecured debt, is a market-first for the aircraft leasing industry in Ireland whose customer base has been seriously impacted by COVID-19. We look at the NAC scheme of arrangement and consider whether it is a viable restructuring option for the aviation sector more generally.

The Department of Business, Enterprise and Innovation has published the general scheme of proposed legislation amending the Companies Act 2014.

1. Summary

The Supreme Court decision in Bresco Electrical Services Ltd (In Liquidation) v- Michael J Lonsdale Electrical Ltd handed down on 17 June 2020 is both timely and significant given the "new normal" that we are all now operating within. In the current economic climate of "lockdown" and the present economic downturn that is now occurring, the worlds of construction and insolvency are now likely to interact and collide on a more frequent basis.

What new measures have been introduced by the UK government to provide further support to commercial tenants struggling to pay rent?

Speed read

The High Court has recently ruled that the agreement between the liquidator of a company and the parent of that company, which contemplated the transfer of all of the assets of the company to the parent gave rise to a trust arrangement on the facts of the case. As a consequence of that trust arrangement, lands which were inadvertently not transferred by the liquidator in the course of the liquidation were deemed not to have vested in the State when the company was dissolved, as would otherwise have been the case under the State Property Act, 1954.

The COVID-19 global crisis has brought cross border insolvencies into focus as companies consider the challenges that may arise where assets are situated across a number of jurisdictions and where an insolvency event may occur. Drawing on our experience of cross border restructurings, and the issues that should be considered, we look at the key issues to consider when assessing if you should implement a restructuring where an Irish company is involved and which restructuring tool to avail of.

Landlord and tenant relationships are likely to come under strain as tenants experience financial difficulties due to the COVID-19 pandemic. For tenant companies such financial difficulties may result in a tenant being placed in examinership, or ultimately in the appointment of a liquidator or receiver. An insolvency event generally constitutes an event of default in a commercial lease.