After a turbulent weekend, the news on Monday morning that HSBC had acquired Silicon Valley Bank UK (SVB UK) caused the UK tech community to breathe a huge sigh of relief.
It was also a very different outcome to the one that seemed destined on Friday when the Bank of England announced it intended to put SVB UK into a bank insolvency procedure.
The FDIC receiverships of Silicon Valley Bank and Signature Bank have caused certain early-stage companies to face potentially crippling near-term liquidity issues. These liquidity issues may result in a company becoming insolvent. Therefore, boards of directors of such companies need to consider their fiduciary duties as well as steps that can be taken to mitigate risks.
Fiduciary duties are typically owed to the company for the benefit of its owners.
News of HSBC's acquisition of Silicon Valley Bank UK (SVB UK) has brought huge relief to the UK tech community and wider economy – quite possibly the optimal result in the circumstances following the Bank of England's announcement of a likely insolvency procedure on Friday 10 March.
In what was described as a “momentous decision for company law”, the Supreme Court in BTI 2014 LLC v. Sequana SA and Others [2022] UKSC 25 (“Sequana”) confirmed the existence of a duty owed by company directors to consider the interests of its creditors when nearing insolvency.
It marks the first time the nature, scope, and content of directors’ duties to creditors when a company is nearing insolvency has been considered by the Supreme Court.
Our last newsletter commented on high inflation, dwindling business confidence and international supply chain issues. Those factors continue to influence the economic outlook, with some businesses unable to survive the strengthening head winds impacting the economy. The consumer price index increased 7.2 percent in the 12 months to December 2022, remaining stubbornly high despite significant movements in the official cash rate to 4.5%, up significantly from the 0.25% it was sitting at in October 2021. ANZ's economic forecast warns that a "policy induced recession is looming".
The Bank of England (the BoE) will apply to put the UK arm of Silicon Valley Bank (SVB UK) into Bank Insolvency, which is a modified version of liquidation under Part 2 of the Banking Act 2009, on Sunday 12 March 2023 unless a buyer can be found for SVB UK’s business and assets.
The situation remains fluid and this represents our advice based on public announcements by the BoE and SVB UK that we are aware of as at 12pm on 12 March 2023.
Liquidators accepting a new appointment will have to think carefully if there's a possibility of disclaiming onerous property as part of that appointment.
GIVEN THE RECENT NEWS REGARDING SILICON VALLEY BANK, RICHARD OMAN LOOKS AT THE IMPACT THAT LENDER INSOLVENCY HAS ON LOAN FACILITIES AND WHAT BORROWERS AND LENDERS NEED TO CONSIDER.
BACKGROUND
Concern amongst sports aficionados around the financial integrity of the sports industry was raised in late 2022 when rugby union was the latest sport to be dragged into the insolvency conversation. Both Wasps RFC (Wasps) and Worcester RFC (Worcester, and together with Wasps, the Clubs), who can each trace their history back to the mid-19th century, appointed administrators after facing financial difficulties they attributed to the Covid-19 pandemic and resulting lockdowns.
Restructuring and insolvency professionals are showing real ingenuity when restructuring insolvent businesses, and landlords need to keep up.
Economic downturns create opportunities for the restructuring or acquisition of challenged assets, and we anticipate increased activity in this space in 2023. The indicators pointing in that direction are: