Before embarking on any litigation, or continuing any litigation that is on foot at the time of the liquidator's appointment, a liquidator should carefully weigh up the benefits and risks of pursuing a particular course of action.

A liquidator can be exposed personally in litigation. We discuss the risks to a liquidator associated with litigation by examining some recent cases where liquidators have been ordered to pay costs personally. We provide guidance on ways to mitigate this risk.

Balancing risk – weighing up competing priorities

In what is likely to be the most significant change to the UK restructuring and insolvency market since the Enterprise Act 2002, the Court has yesterday¹ paved the way for restructuring plans under Part 26A to the Companies Act 2006 ("RPs") to be used to compromise the rights of landlords, financial creditors and other unsecured creditors provided the company shows that those creditors are "out of the money". There may even be no need to ask those compromised creditors to vote on the RP.

Pre-packaged administration sales (where a sale of key assets is agreed prior to the appointment of administrators and then implemented by the administrators immediately following their appointment), have been a widely-used and highly successful tool to rescue businesses, or parts of businesses, that may otherwise have languished in administration interminably.

WWRT Limited v Tyshchenko & Tyshchenko [2021] EWHC 939 (Ch)

Judgment date: 21 April 2021 (Bacon J)

Overview

With tech now more vital than ever for most businesses, the failure of an IT service provider can be catastrophic. As businesses suffer from the knock-on effects of the pandemic and insolvencies look set to increase, it is important for businesses to protect themselves as far as possible in their commercial relationships.

Protection for both the IT service provider and the business comes from the contract they enter into with each other. We take a look at the key points to consider.

IT service providers

From 6 April 2021, a new regime for witness statements in the Business and Property Courts will come into force. Practice Direction 57AC will introduce significantly tighter requirements that will apply to all trial witness statements signed on or after 6 April 2021, including those in claims that have already been issued.

Purpose of the new regime

The COVID - 19 pandemic has had a tremendous and unprecedented impact on the global economy.To mitigate this, many governments have introduced temporary relief measures to help local businesses.

CVAs remain the restructuring tool of choice for businesses with multi-let properties. Since the start of the first UK lockdown, there has been a marked increase in the number of CVAs in the hospitality and retail sectors. Whilst vaccines are now being dispensed, the economic ramifications of the pandemic will persist for some time to come and as a result we expect to see many more CVAs being proposed, particularly in these sectors. The introduction of R3's Standard Form COVID-19 CVA Proposal could lead to an increase in the use of CVAs in the SME market too.

Apperley Investments Limited & Others v Monsoon Accessorize Limited [2020] IEHC 523

The Commercial Court has refused to apply the provisions of a Company Voluntary Arrangement (“CVA”), negotiated pursuant to the Insolvency Act 1986 in the UK, to Irish landlords as it would be “manifestly contrary to the public policy of the State”.

These proceedings were taken by Irish landlords over properties in Dublin and Cork leased to the fashion retailer Monsoon.

The UK’s reformed restructuring regime shows its force with the first successful cross-class cram-down following the introduction of the new restructuring plan. A quick legal update on the key features of the restructuring plan and the analysis of the recent cases can be found in the infographic below.

Contributors to this update were Howard Morris, Amrit Khosa, Jai Mudhar, Joe Donaghey, and Haania Amir.