In a corporate world where the capital structures of companies are becoming increasingly complex, schemes of arrangements under the Companies Act 2006 have established themselves as the restructuring procedure of choice for many distressed companies. This popularity is evidenced by the fact that schemes of arrangement have been increasingly used by overseas companies wishing to restructure their debts under the flexibility offered by English law.
DECISION OF THE GENERAL DIRECTORATE ON REGISTRIES AND NOTARIAL ACTIVITIES DATED OCTOBER 6, 2015: NO PUBLIC DEED REQUIREMENT FOR REGISTERING PROPERTY JUDICIALLY AWARDED IN AN INSOLVENCY PROCEEDING
It is not surprising that within an economic outlook which seems permanently set to "gloomy" many companies are having to think about reorganising their operations or restructuring their holding structures This article highlights some of the tax and other considerations which must be borne in mind when considering such reorganisations or restructurings with reference to some recent (and less recent) cases and changes in the law and points which have come to the fore in the current climate.
Recapitalisations
In March 2020, Business Secretary Alok Sharma announced that provisions on wrongful trading would be suspended. The move came as part of a wider package of measures that sought to provide assistance to businesses – and their beleaguered boards – experiencing financial distress due to Covid-19.
Now set out in the Corporate Insolvency and Governance Act 2020 (CIGA), which was passed on 26 June 2020, the provisions adapt the wrongful trading regime making directors’ liability for the “relevant period” unlikely.
Why does it matter?
Can a company file a notice of intention to appoint an administrator (NOI) if administration is just one of a number of potential options being explored for rescuing the company?
Removal of requirement for sanction
Previously under section 165 IA 86, liquidators in a voluntary winding up would have to seek sanction of the company (in members’ voluntary liquidation) or of the court or liquidation committee (in creditors’ voluntary liquidation) in order to exercise their powers to pay debts, compromise claims etc. SBEEA removes this requirement so that liquidators can exercise those powers freely. This will aid expeditious winding up of companies. Equivalent provisions have also been put into place for trustees in bankruptcy.
The British Virgin Islands Commercial Court has recently delivered a decision in Western Union International Limited v Reserve International Liquidity Fund Ltd which addresses the issue of when during the redemption process a redeeming investor becomes a creditor of the fund and is therefore entitled to apply for the appointment of a liquidator.
The British Virgin Island’s Commercial Court has recently delivered a decision in Western Union International Limited v Reserve International Liquidity Fund Ltd which addresses the issue of when during the redemption process a redeeming investor becomes a creditor of the fund and is therefore entitled to apply for the appointment of a liquidator.
The case of Hunt (as Liquidator of System Building Services Group Ltd) v Michie & Ors [2020] EWHC 54 (Ch) examines whether directors’ duties continue after the company has become insolvent and confirms that they do, bringing welcome clarity to the point. As such, Insurers will need to review their policies to make clear if they wish to cover this risk.
Judge decides whether an insurance company proposing a scheme of arrangement should convene a single class meeting of creditors