The purpose of this note

The profound business and market interruption already caused by the COVID-19 outbreak has introduced insolvency risks for many otherwise healthy businesses. 

This note summarises proposed insolvency law reforms announced on 28 March 2020 with some commentary on other recent COVID-19 developments in this area, including: 

COVID-19 and Government-imposed restrictions are placing an unprecedented strain on everyone and businesses and individuals may be facing extreme financial pressure. COVID-19 is impacting businesses throughout the supply chain in most, if not all, sectors. This may mean that clients and debtors are unable to meet their obligations and there may need to be changes as to how these are dealt with. This note aims to provide some guidance to help Insolvency Practitioners (“IPs”) deal with certain practical issues that may arise in active cases.

In response to the profound market disruption caused by the coronavirus pandemic and to stave off a predicted “tsunami” of corporate insolvencies, the UK Government has announced its plans to enact a series of urgent law reforms, aimed at keeping as many of the affected businesses as possible intact and trading. 

The UK government has announced amendments to certain aspects of insolvency law, designed to enable businesses which have been adversely affected by the coronavirus outbreak to continue trading while they explore options for rescue or to restructure.

COVID-19 has had an unimaginable impact on the corporate world. The assumptions on which parties approached corporate transactions like Joint Ventures (JV) have often been blown off course. Businesses that are party to JVs must monitor not just themselves but the condition of their JV partner and the impact that they may have on the JV. There is no 'off the shelf' Joint Venture Agreement (JVA). Analysing the legal and practical rights and constraints in each JV is therefore essential.

The Government has launched a number of initiatives to assist companies and businesses to trade through the current financial stress. But what should directors still be aware of as they steer their organisations through these unprecedent times?

During the Global Financial Crisis, borrowers who needed to refinance their maturing debts faced difficulty. Lenders had neither the appetite nor the ability to lend, save in limited circumstances. The income generated by commercial real estate assets often did not change, however.

The restrictive measures imposed in an attempt to curb the spread of Covid-19 are creating an unprecedented and often existential challenge for businesses across the globe, and sports clubs are no exception. Indeed, given the suspension of almost all sports, sports clubs are amongst the worst hit, as most sources of revenue dry up including (depending on where they fall within the pyramid) ticket sales, subs, and revenue gained from hiring out venues for concerts, conferences and other private events.

As a creditor, especially during the current Covid-19 crisis, it may be tempting to accept all and any payments from debtors.

Payments that a debtor company makes to you during the period where there is a winding-up petition in place will be a void disposition, under section 127 of the Insolvency Act 1986, unless there is an application to the Court and receipt of what is known as a “validation order,” allowing you to keep the money.

What’s happening in real life?

A recent Sheriff Court judgment is the latest decision to consider the role and remit of the court reporter in a liquidation which, unusually, involved the court appointing two reporters.

In Scotland, the Insolvency (Scotland) (Receivership and Winding Up) Rules 2018 provide that where there is no creditors committee, the remuneration of a liquidator shall be fixed by the court. In practice, the court appoints a reporter to examine and audit the liquidator’s accounts and to report on the amount of remuneration to be paid.