What can the UK and South Africa learn from each other by comparing the business rescue regime with administration?
South Africa’s relatively recent business rescue regime (introduced in 2011) has exploded into a popular process for “affected persons” facing a company in financial distress. It shares some aspects with the administration procedure in England and Wales (UK). Lessons can be drawn from both the similarities and the differences between the two procedures that may benefit restructuring and insolvency practitioners both in the UK and South Africa.
It has long been a bone of contention for landlords that tenants can simply file a notice of intention to appoint administrators in order to get an automatic moratorium against any enforcement action. This prevents a landlord from forfeiting, suing or exercising CRAR irrespective of whether the tenant goes into administration and, seemingly, whether it ever really had such an intention.
London & Westcountry Estates Limited ("LWE") went into administration in March 2012. The directors of LWE claimed that its bankers had mis-sold an interest rate swap product to them, and that they were, as a result, entitled to compensation. As LWE was in administration, it was for the administrators to bring the claim against the bankers. The administrators, however, declined to bring an action on behalf of LWE, and also declined to assign the cause of action to the directors.
On 29 February 2012, the Supreme Court handed down its decision In the matter of Lehman Brothers International (Europe) (In Administration) and In the matter of the Insolvency Act 1986. The appeal addressed the meaning and application of Chapter 7 of the Client Assets Sourcebook (CASS 7) issued by the FSA for the safeguarding and distributing of client money in implementation of the Markets in Financial Instruments Directive 2004/39/EC.
Background
His Honour Judge Purle QC in Re Cornercare Limited [2010] EWHC 393 (CH) has clarified English law on the filing of successive notices of intention to appoint administrators. He has held that there is nothing in the relevant provisions of the Insolvency Act 1986 ("IA 1986") to prevent the filing of successive notices of intention to appoint administrators, where the original notice of intention to appoint an administrator had not been acted upon for good reason.
Long awaited insolvency reforms in the UK, plus the government’s COVID-19 proposals on the use of statutory demands – and much more
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On 28 March 2020 the Secretary of State for BEIS, Alok Sharma, announced that changes would be made to the UK insolvency laws to help companies "…emerge intact the other side of the COVID-19 pandemic…to give them extra time and space to weather the storm and be ready when the crisis ends whilst ensuring creditors get the best returns possible in the circumstances".
The UK Parliament made an Order on 3 March 2020 which increases the prescribed part, payable to unsecured creditors from floating charge recoveries on the insolvency of a company from £600,000 to £800,000.
Back in August 2018, in its paper entitled “Government Response: Insolvency and Corporate Governance” (the 2018Paper) the Government responded to its consultation on ‘Insolvency and Corporate Governance‘ with the announcement of several reforms and proposed next steps.
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On 19 September 2019, Norris J handed downjudgment in the challenge brought by six landlords against the Debenhams Retail Limited (Debenhams) company voluntary arrangement (CVA) which was approved by 94.71% of Debenham’s unsecured creditors on 9 May 2019.