On 20 May 2020, the U.K. government published the Corporate Insolvency and Governance Bill (the bill), which includes measures designed to help businesses through the COVID-19 pandemic and features important substantive reforms to U.K. restructuring law, whose introduction has been accelerated by the crisis.
COVID-19-Related Measures:
The key temporary measures introduced by the bill are:
Statutory Demands and Winding up Petitions
The New York Court of Appeals’ recent 4-3 opinion in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., 2020 WL 6163305 (NY Oct. 22, 2020), could provide minority noteholders with additional negotiating leverage in the context of attempted out-of-court restructurings. However, the scope of this decision’s impact, and whether it conflicts with the U.S. Court of Appeals for the Second Circuit’s prior holding in Marblegate Asset Mgmt., LLC v. Educ. Mgmt. Fin. Corp., 846 F.3d 1 (2d Cir.
The economic hardships brought about by the COVID-19 pandemic have impacted companies globally, leading many to consider both in-court and out-of-court restructurings. Because this trend will likely continue as the long-term effects of COVID-19 play out, companies with arbitration clauses in their commercial agreements may wish to consider the impact of insolvency on their options for pursuing pending or future arbitrations.
Europe's latest legislative response to the recent financial crisis — the Bank Recovery and Resolution Directive (BRRD) — is intended to establish a minimum common toolbox for regulators in each member state to address bank solvency issues sooner, maintain key financial functions and minimize the impact of any failure.
The BRRD has to be implemented in each member state at the beginning of 2015 following its adoption by both the European Parliament and the Council of the EU, and it follows other measures to improve banks' capital structure in order to make failure less likely.
French courts are closed for the unknown duration of the COVID-19 lockdown. Businesses facing immediate difficulties may still file for emergency or restructuring proceedings. Filings must be made electronically and hearings will be conducted remotely.
Court Closures
The following article is the translation of an associated podcast, which is available in German here.
A moratorium on bankruptcy filings and certain security enforcement has been imposed by the Russian government for at least six months with respect to many categories of companies. During this period, the ability of creditors to enforce their existing rights will be restricted significantly. It is likely that the negotiating balance will swing in debtors’ favor, but the moratorium will place all business and survival decisions of those protected companies under increased scrutiny and at risk of being challenged or found void in certain cases.
Legal Background
Although political and economic uncertainties tempered corporate activity somewhat in 2016, the trends and fundamentals that have the potential to drive transactions remain in place in 2017.
Capital Markets
The U.K. government has announced a series of measures intended to support businesses impacted by coronavirus/COVID-19, including suspension of the wrongful trading regime, a job-retention scheme and a temporary ban on the eviction of commercial tenants.
Suspension of Wrongful Trading Regime
The U.K. government is proposing to reintroduce preferential status to certain taxes in U.K. insolvencies beginning 6 April 2020. If enacted:
- certain taxes owed to HM Revenue & Customs (HMRC) would rank ahead of floating charges in U.K. insolvencies;
- the legislation would be retroactive, applying to such tax liabilities incurred at any time prior to insolvency; and
- it is likely to have a significant impact on asset-based loans (ABLs) involving U.K. obligors.
Introduction