On 8 October the Insolvency Service published a report on pre-pack sales in administrations, together with draft regulations imposing a mandatory referral to independent scrutiny in the case of pre-packaged sales to connected parties.
This article, written by Tim Carter and Helen Martin, considers the background to the proposed regulations, their content and their potential impact.
Background
Perseverance, dear my lord Keeps honour bright: to have done, is to hang Quite out of fashion, like a rusty mail In monumental mockery William Shakespeare, Troilus and Cressida
Styles & Wood (In Administration) v GE CIF Trustees (unreported) (County Court at Central London)
On 29 September 2020 the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 came into force. To keep this snippy, we’ll refer to these new Regulations as “CIGAR”.
On 4 September 2020, the High Court sanctioned a restructuring plan of Virgin Atlantic Airways Limited (Virgin) under the new Part 26A of the Companies Act 2006, brought in by the Corporate Insolvency and Governance Act 2020 (CIGA); this is the first time the court has sanctioned a restructuring plan under the new Part 26A.
Assuming the Pizza Express company voluntary arrangement (CVA) follows the approach taken by other casual diners and retailers who have also launched CVAs recently, we can predict with some confidence what the Pizza Express CVA proposal might say.
The recent High Court decision in Hellard & Anor v Registrar of Companies & Ors [2020] EWHC 1561 (Ch) (23 June 2020) serves as a useful reminder to any party seeking the restoration of a company to the Register of Companies that it is important first to consider whether such party has the requisite standing to make the application.
New restrictions contained in the Corporate Governance & Insolvency Act 2020 now in force severely impact the steps creditors can take to get payment of an undisputed debt owed by a company.
Creditors cannot now use statutory demands to threaten that a company will be wound up if it does not pay what is owed. This is because any statutory demand made between 1 March 2020 and 30 September 2020 will be void.
Enforcement options in England & Wales – recent High Court judgment provides rare guidance on Orders for Questioning
Once the litigation or arbitration has been fought and you obtain a judgment in your favour, if your opponent does not pay up, a new process will begin in attempting to enforce that judgment.
Why has it been difficult to get a winding-up order?
The Corporate Insolvency and Governance Act 2020 (CIGA 2020) came into force on 26 June. Under CIGA 2020, creditors are (currently until 30 September 2020, although the period may be extended) unable to present a winding-up petition on the basis of:
The rapid onset of the COVID-19 pandemic, coupled with the drastic lockdown restrictions, has left many businesses – particularly those that rely on heavy footfall – in dire financial circumstances.
Businesses are therefore seeking tools to help them weather this storm and light-touch administration is an option that continues to rear its head.
What is it?