The COVID-19 pandemic has exacerbated the problems faced by high-street retailers. Store closures during lockdown, changing consumer behaviour and the resultant loss of turnover and profits have caused many businesses to seek to reduce their rent payments. Company Voluntary Arrangements (“CVAs”) have become fashionable tools for trying to secure such rent reductions.
Increasing pressures placed on those operating in the retail and hospitality sectors as a result of COVID-19, means there is likely to be an increasing use of CVAs in these sectors. The intention would be to help support and restructure businesses in distress, but could retailers use a CVA as a mechanism to re-write the terms of its leases?
The case of Arlington Infrastructure Ltd (In Administration) v Woolrych [2020] EWHC 3123 (Ch) is a cautionary reminder to qualifying floating charge holders (and their advisors) to review the terms of all security documents, before seeking to appoint an administrator.
The temporary restrictions that prohibit winding up proceedings where non-payment is COVID-19 related, and restrict petitions based on unsatisfied statutory demands, that would have come to an end on 31 December 2020 have been extended until 31 March 2021.
What are the restrictions?
Statutory demands
Creditors cannot rely upon an unpaid statutory demand as evidence of inability to pay debts in order to issue a winding-up petition against a company, effectively rendering the statutory demand void for that purpose.
The UK Government has announced that the temporary prohibition on forfeiture will be extended when the current prohibition comes to an end at the end of the year. The restriction, that prevents commercial landlords from forfeiting a lease for non-payment, will now be in place until 31 March 2021.
The Australian government has taken swift action to enact new legislation that significantly changes the insolvency laws relevant to all business as a result of the ongoing developments related to COVID-1
The case of Arlington Infrastructure Ltd (In Administration) v Woolrych [2020] EWHC 3123 (Ch) is a cautionary reminder to qualifying floating charge holders (and their advisors) to review the terms of all security documents, before seeking to appoint an administrator.
In the recent case of Patel v Barlow's Solicitors and others [2020] 2753 (Ch) the High Court found that a Quistclose Trust arose in a situation where solicitors were forwarded monies by a third party for a specific purpose.
The Australian government has taken swift action to enact new legislation that significantly changes the insolvency laws relevant to all business as a result of the ongoing developments related to COVID-19.
On 26 November 2020, The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (the “Regulations”) came into force.