In previous weeks our Financial Services Updates have discussed certain proactive measures that lenders and borrowers can take in light of the COVID-19 pandemic. This week our update focuses on the ability of companies to terminate contracts in accordance with their provisions or disclaim or resiliate contracts in the context of a restructuring.
It is perhaps an inevitable result of the current global pandemic that employers, main contractors and subcontractors alike will be dusting down the guarantees they have been given, or provided to others, in respect of their ongoing projects. For those who have been given them they need to establish what security those guarantees actually provide and, perhaps as importantly, how quickly they will pay out.
Re Debenhams Retail Limited [2020] EWHC 921 (Ch)
The Situation: In the past few weeks, due to the severe impact of the COVID-19 crisis on non-essential businesses forced to close and terminate employees after filing for chapter 11 protection, bankruptcy courts have been confronted with requests by debtors to temporarily suspend their bankruptcy cases using the courts' equitable powers and a seldom-used provision of the Bankruptcy Code: 11 U.S.C. § 305(a).
Thomas Williams, Ahmed Durrani and Umang Singh, Sultan Al-Abdulla & Partners
This is an extract from the 2020 edition of GAR’s Middle Eastern and African Arbitration Review . The whole publication is available here.
Introduction
The tragically unforeseen current novel coronavirus (COVID-19) global pandemic has brought unprecedented challenges to all aspects of Hong Kong society including the health of its citizens, the economy and the business community.
An issue plaguing successful resolution applicants under the Insolvency and Bankruptcy Code, 2016 (“IBC”) is with respect to government claims pertaining to the period prior to approval of the Resolution Plan. Government claims, such as those raised by the Income Tax Department, Central and State GST Department, extinguished by resolution plans continue to be pursued by such departments by way of issuance of demand notices under respective statutes.
A mere few weeks ago, the hypothesis that the COVID-19 virus would not affect the African continent was still being widely propagated. The theory that the virus does not survive in warm weather has since been debunked and the number of African countries that have recorded confirmed cases of coronavirus is growing rapidly. On 18 March 2020, the Director-General of the World Health Organisation, Tedros Adhanom Ghebreyesus, warned that Africa has to prepare for the worst.
In a recent decision, the First Circuit Court of Appeals ruled that the rejection by a licensor of a trademark license stripped the licensee of its right to use the trademark post-rejection, reversing a decision by the intermediate bankruptcy appellate panel (BAP) and reinstating the bankruptcy court’s original judgment. In re Tempnology, LLC, 2018 WL 387621 (1st Cir. Jan. 12, 2018), reversing in part 559 B.R. 809 (B.A.P. 1st Cir. 2016). The First Circuit did, however, affirm that the rejection stripped the licensee's exclusive product distribution rights.
With COVID-19 causing ever increasing financial uncertainty around the globe, we thought it an apt time to provide you with a summary of the various corporate insolvency procedures in the UK applicable to companies facing financial difficulties. Taking each in turn, we will discuss administration, administrative receivership, company voluntary arrangements, schemes of arrangement and liquidation. We will also touch briefly on directors’ duties, rules relating to asset distribution on insolvency and transactions that may be set aside on insolvency or ‘reviewable’ transactions.