Banks often take security for the loans they advance – doing so gives them some additional protection if a borrower fails to repay the loan when due. Where the borrower is a company, that security can take the form of a mortgage, a security assignment, a pledge, lien, or a charge. In this short article, we explain what a charge is and the differences between a fixed and floating charge.

But firstly, what is a charge?

The High Court has approved the sale of a portfolio of securities owned by Sova Capital Limited (Sova) to an unsecured creditor in consideration of the release of that creditor’s claim. The court’s approval of the transaction in this case marks the first reported decision on an unsecured credit bid for the assets of a company in administration (Re Sova Capital Limited (in special administration) [2023] EWHC 452 (Ch)).

Facts

With the passage of several years since the outbreak of COVID-19 and additional external factors such as the soaring prices of various goods and services and the sharp depreciation of the Japanese yen, companies' financial conditions have deteriorated, while others are considering filing for restructuring proceedings, which is why the reduction of excessive debt has become a major issue as of late.

In an increasing number of restructuring cases of globally-operating companies, companies or funds outside Japan are becoming strong sponsor candidates, and even more foreign players are expected to be actively selected as sponsor candidates in the future.

In this article, we focus on the sponsor selection process in out-of-court restructurings and legal insolvency procedures in Japan, based on recent actual cases.

Cryptocurrency is a hot topic in the legal industry and one with which the legal world is really just starting to grapple. This is ever more prevalent with a number of recent high-profile crypto insolvencies including Three Arrows Capital, Celsius Network and FTX.

Today’s statistics reveal a stark reality that insolvencies are continuing to climb in the face of record levels inflation, increasing interest rates and an ongoing cost-of-living crisis, which is pushing businesses to breaking point. The situation is exacerbated by the lack of any new government support for businesses, which are particularly affected by the steep rise in energy costs.

Wind the clock back a couple of years to (dare I mention it…) the Covid-19 pandemic, and insolvency practitioners were getting mildly giddy about a new development in the form of a standalone moratorium. Slotting in at the forefront of the Insolvency Act 1986 courtesy of the Corporate Insolvency and Governance Act 2020 (CIGA), the moratorium was designed to give companies a breathing space to find a solution to their troubles when insolvency was knocking on their door.

Amidst the cost of living crisis, businesses are folding in record numbers, with barely a week passing without news of a big company casualty. Paperchase is the latest retailer to collapse into administration, with the business being snapped up by Tesco for sale in its superstores and 820 jobs reportedly at risk. So how can we identify the businesses that are in the danger zone and could be heading for insolvency?

1. Profit warnings

FTX Trading Ltd. ("FTX") and its affiliates (collectively, "FTX Group"), which operated one of the largest crypto-asset exchanges in the world through the FTX.com platform, filed for Chapter 11 in the United States on November 11 last year.

While many businesses (particularly in the retail, leisure and hospitality industries) will have been hoping to capitalise on a busy festive period, sadly for many the busy period came too late as corporate insolvencies rose again in December. Overall, company insolvencies were 32% higher than December 2021, and 76% higher than in December 2019 (i.e.