The Corporate Insolvency and Governance Act 2020 has introduced a new standalone moratorium procedure for companies.1 The moratorium is part of a package of significant legislative reforms contained in the Act, intended to enhance the UK’s restructuring rescue culture. These were originally consulted on between 2016 and 2018 and were fast-tracked to deal with the COVID-19 pandemic.
Overview
A company’s intellectual property rights[1] are some of its most valuable and most enduring assets. They are also often the most encumbered, or the most enhanced, by contract.
On Monday, May 20, 2019, the United States Supreme Court issued an 8-1 decision holding that a bankrupt company’s decision to reject an existing license of its trademarks does not terminate a licensee’s right to continue using the licensed trademarks.
In 2016 the High Court considered the validity of an assignment of a lease by a tenant to its guarantor. The antiavoidance provisions in section 25 of the Landlord and Tenant (Covenants) Act 1995 ("1995 Act") strictly limit the freedom of contract of parties to leases governed by that Act, broadly, those granted after 1995. Agreements which frustrate those provisions are void even if they are commercially justifiable.
BRIEF FACTS AND DECISION
EMI Group Limited v O&H Q1 Limited [2016] EWHC 529 (Ch)
The US Bankruptcy Court for the Southern District of New York has issued a ruling in a chapter 11 case that could have a significant impact on future restructurings in the oil and gas industry.
On March 8, 2016, in the case of Sabine Oil and Gas Corp., Judge Shelley Chapman ruled that Sabine could reject certain pipeline and gas gathering agreements with two midstream gathering pipeline companies.
Overturning two significant recent decisions, the Court of Appeal has held that whenever a rent payment day falls, from the moment a company in administration beneficially retains property, it will ordinarily be liable to pay rent as an expense for the period of that beneficial retention.
A week is often described as a long time in politics, and so also (it seems) with the restructuring market.
Last week, we saw significant strides forward with:
The Supreme Court has recently released a decision on directors' duties, which should serve as a timely reminder to all directors of their duties under the Companies Act in circumstances of insolvency. Continuing to trade while insolvent will be a breach of your duties, even if you believe that overall creditors may be better off or the extent of losses will be reduced. It is however welcome confirmation for liquidators that the Courts will enforce the provisions of the Companies Act based on the clear wording of these sections.
On 22 May 2020, Justice Black of the Supreme Court of NSW issued judgment In the matter of Wollongong Coal Limited and In the matter of Jindal Steel & Power (Australia) Pty Ltd [2020] NSWSC 614. The judgment sets out his Honour’s reasoning for granting the orders sought in a largely unprecedented application to effectively ‘re-enliven’ two schemes of arrangement which automatically terminated prior to being completed.
There are limits on the ability of shareholders to ratify dubious acts of the directors – it cannot be effective if the interests of existing creditors have become paramount (so as to subordinate the duties owed to shareholders) and are prejudiced. This is particularly relevant to upstream guarantees. On 6th February, the Court of Appeal gave its 51-page judgment in BTI 2014 LLC v Sequana S.A which is relevant to exactly this point.