Globalisation means that the effects of a business entering insolvency proceedings rarely stay within the territorial confines of a single jurisdiction; one need only look to the recent cryptocurrency bankruptcies as evidence of this. Cross-border insolvencies are no longer the preserve of large multinational corporation failures. Globalisation and the advent of digitisation mean that even small enterprises have customers, assets, and suppliers in multiple countries. This is particularly so across Asia.
Key takeaways
In BTI 2014 LLC v Sequana SA and others,1 the UK Supreme Court considered for the first time the existence, content and triggers of the obligation on directors to have regard to the interests of creditors when a company becomes insolvent or is bordering on insolvency (the Creditor Duty).
This decision addresses important issues for directors, stakeholders, and advisors of UK companies.
Background
Protecting your business from exposure to supplier and customer insolvency
As we move through Q1 of 2023, significant shifts are occurring in the Global financial and economic landscape which are of significant consequence for business. The marked upward shift in the cost (and reduced availability) of finance, largely unseen for over a decade, combined with high energy and natural resource/raw material costs and challenges and currency fluctuations has the potential to sharply to expose financial distress in businesses in many countries and global supply chains.
We have emerged from the COVID-19 pandemic amidst war, political instability, strikes and double-digit inflation rates that haven’t been seen since the early 1980s. With interest rates likely to continue to rise during the first half of 2023 and pay increases falling short of inflation, consumer confidence remains low. Companies’ margins are being squeezed by rising interest rates and when combined with increased debt burdens, supply chain difficulties and labour shortages it is no surprise that the number of insolvencies across the UK is increasing.
UK Restructuring A YEAR IN RETROSPECT 2 Contents Introduction Birmingham London North West Yorkshire UK team UK Restructuring Employment UK Restructuring Section Header Section Header Contents 3 Robert Russell UK Head of Restructuring +44 (0)161 235 4147 [email protected] 2022 – Unpredictable circumstances It would be fair to say that 2022 was not an easy year.
The end of 2022 and the start of 2023 has seen a steady uptick in restructuring activity, not only for companies with complex capital structures but also small-to-medium sized enterprises seeking to take advantage of powerful restructuring tools (such as the UK’s Part 26A Restructuring Plan or Super Scheme).
The case of Goodbox Co Labs Limited (in administration) (Goodbox) is the first example of an individual creditor unilaterally seeking to access the Super Scheme.
The restructuring of Hong Kong Airlines has been approved. It is the first time that a parallel English Restructuring Plan and Hong Kong Scheme of Arrangement have successfully been used to restructure Hong Kong, PRC and English law-governed debts.
For the background to the restructuring and details of the plan and scheme, please see our article here.
There has been no shortage of distressed airlines over the last 2.5 years as the COVID-19 pandemic and its economic reverberations wreaked havoc across the aviation sector and travel industry alike. Virgin Atlantic Airlines, Norwegian Air, Garuda, Malaysia Airlines (its leasing wing MAB Leasing Limited), AirAsia X and SAS are just some of the airlines to have gone through, or are in the process of, debt restructurings or deployment of asset and liability management strategies.
How did we get here?
The crypto markets were rocked again last week by the collapse and bankruptcy of FTX and Alameda Research. Within a few short days, Sam Bankman-Fried (SBF) and his companies went from a stabilizing force for markets and acting as an industry leader to causing one of the greatest disruptions in digital asset market history.
The 11 October 50-page judgment of Hildyard J in The joint administrators of Lehman Brothers International (Europe) v FR Acquisitions Corporation (Europe) and JFB Firth Rixson will interest not only those who deal with ISDA Master Agreements (who may want to read the entire judgment), but also many lawyers and financial and commercial institutions. This is because the events of default which it had to consider, and especially the meaning of the word “continuing” in this context, are relevant to bonds, loans and various commercial contracts.