Background

The Corporate Insolvency and Governance Act 2020 (CIGA) came into force on 26 June 2020.

Schedule 10 of CIGA restricted the presentation of debt-related winding-up petitions where a company cannot pay its bills (including rent) due to COVID-19 in Great Britain.

These restrictions were initially due to end on 30 September 2020, but have since been extended until 30 September 2021.

The Current Position

PH Insight for News and Analysis of the Latest Developments from the Courts of England and Wales for August 2021

In this edition. . .

Summary

With government support instigated by the Covid-19 pandemic coming to an end, there is an inevitability that some hotel owners will sadly not have the liquidity to continue to operate in the medium term. Eager investors are seeing opportunities and are waiting to deploy capital. We examine the main considerations for investors who are looking to purchase distressed hotel assets out of an insolvency process.

General Introduction

The questions that an insurer asks prospective insureds on an application for insurance, and the answers given in response, can have important ramifications on the parties’ rights and obligations going forward. The proper interpretation of those questions can often prove crucial in determining whether the insured has complied with their obligation to disclose material facts and give a fair presentation of risk. The consequences of any misrepresentation or material non-disclosure can be significant, including denial of coverage by the insurer.

Test for risk of dissipation

The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, which is currently being considered in the House of Lords, contains significant implications for directors of dissolved companies.

The key provisions of the Bill, which if passed is likely to become law in late 2021 or early 2022 and importantly expressly provide that it will have retrospective effect, are that the Insolvency Service will be able to:

The UK Government has announced changes to the regime for winding-up petitions. With effect from 1 October 2021, some of the protections currently afforded to businesses against aggressive debt recovery action are being phased out.

The changes are intended to avoid a 'cliff edge' for debtor companies when the current measures lapse at the end of September 2021, and have a tapering effect to avoid the flood of winding-up petitions that might otherwise be expected.

What are the current restrictions (in place until 30 September 2021)?

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (the Bill) has received its first and second readings in the House of Commons and is expected to come into law later this year. But what is this Bill and what does it mean for charities?

The Bill introduces important changes to the insolvency and director disqualification regime in England and Wales and will have implications for incorporated charities including charitable companies and charitable incorporated organisations (CIOs), as well as any trading subsidiaries that your charity may have.

In response to the COVID-19 pandemic, legislation was introduced during 2020 to prevent creditors filing statutory demands and winding up petitions on the basis of their debtor's inability to pay its debts, unless it could be shown that non-payment was not a result of the pandemic. These temporary measures had been extended a number of times during the pandemic as businesses continued to suffer the effects of multiple lockdowns and trading restrictions, but are now gradually being phased out.

There have been two recent changes to the insolvency laws in England and Wales relating to winding up petitions1 and Part 1A moratoriums.

Winding up petitions – Relaxation of restrictions