The economic uncertainty for companies caused by the Covid-19 pandemic has placed a heavy burden on directors. That burden of responsibility is set to become even heavier as the temporary measures introduced in 2020 to support companies during the pandemic come to an end. Small and medium sized enterprises (“SMEs”) and those businesses operating in the travel, hospitality, leisure and manufacturing industries have been impacted in particular.
The highly anticipated Supreme Court decision in Bresco Electrical Services Ltd (in Liquidation) v Michael J Lonsdale [2020] UKSC 25 has endorsed the use of adjudication in the context of insolvency set off, substantially reversing the decision of the Court of Appeal.
Suppliers are now prevented from terminating many contracts and supplies of goods or services if the customer is subject to a ‘relevant insolvency procedure’ (such as going into administration, CVA, or appointing a provisional liquidator).
This follows the Corporate Insolvency and Governance Act 2020, which came into force on 26 June. Although Coronavirus has accelerated the passing of the Act, these are set to be permanent changes.
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A new era of corporate compliance in a time of financial crisis |
The Corporate Insolvency and Governance Act 2020 came into force on 26 June bringing in measures to alleviate the burden on businesses during the Covid-19 pandemic and allow directors to focus their efforts on continuing to operate. In this article we consider the temporary changes to the wrongful trading regime and other key changes introduced by the Act.
Temporary wrongful trading relaxation
The first tentative steps are now being taken to ease the lockdown restrictions imposed on the nation as a consequence of the COVID-19 pandemic and thoughts are turning to how we can return to “normal”. The construction sector is no exception but finds itself in a slightly different position to many businesses as sites were never required to close (provided that work could carry on “safely”). Nevertheless the impact of COVID-19 has wreaked havoc on the finances of the construction sector and the viability of current and future projects.
On 20 May 2020, the Government introduced the Corporate Insolvency and Governance Bill in Parliament. The Bill is a much awaited development following the Secretary of State for Business, Energy and Industrial Strategy’s statement on 28 March 2020 announcing key measures to help businesses address the challenges resulting from the impact of coronavirus.
Financial services firms subject to special insolvency regimes supervised by the FCA, PRA, and other financial services regulators have been largely excluded by the Bill.
Rio de Janeiro-based Oi SA, Brazil’s fourth-largest telecom company, filed on Monday 20 June 2016 the largest judicial reorganisation petition in Brazil’s history, days after debt restructuring talks with creditors collapsed. The filing of Oi and six subsidiaries lists 65.4 billion reais ($19.26 billion) in debt. The company also filed for Chapter 15 protection in the U.S. on Tuesday.
On 20 June 2016, Rio de Janeiro-based Oi SA, Brazil’s fourth-largest telecom company, filed the largest judicial reorganisation petition in Brazil’s history, days after debt restructuring talks with creditors collapsed. The filing of Oi and six subsidiaries lists 65.4 billion reais (USD19.26 billion) in debt. The company has also filed for Chapter 15 protection in the U.S. As from the date of filing the accrual of interests, penalties, monetary correction and late charges are suspended and will only become enforceable if the judicial reorganisation becomes a bankruptcy.
El 20 de junio de 2016 Oi SA, la cuarta empresa brasileña de telecomunicaciones, con sede en Río de Janeiro, presentó la solicitud de reorganización judicial más grande en la historia de Brasil, tras el colapso de negociaciones con acreedores para reestructurar deuda. La solicitud de Oi y sus seis subsidiarias comprenden en total una deuda de 65.4 billones de reales (USD19.26 billones). La empresa también solicitó la protección Chapter 15 en los EE.UU.