During the pandemic, the UK Government has put legislative measures in place to protect commercial tenants by preventing landlords from using certain remedies such as forfeiture and winding up petitions. However, the legislation does not specifically prevent a landlord from issuing debt claims against its tenants for arrears of rent and other amounts due under a lease (see the recent case of Commerz Real Investmentgesellschaft mbh v TFS Stores Limited [2021] EWHC 863 (Ch)).

There has been much debate in recent years around the use made of certain UK restructuring tools – the company voluntary arrangement and, more recently, the new restructuring plan – to restructure commercial property leases. Commercial tenants argue that compromise is necessary to address high fixed costs that are no longer sustainable, but landlords have often been critical of the approach taken. This debate has become more acute in the context of the pandemic, as many High Street businesses subject to mandatory closure have built up significant rent arrears that need to be addressed.

EXECUTIVE SUMMARY

Summary

An important judgment handed down by Zacaroli J yesterday in the New Look CVA challenge. The New Look CVA proposal involved treating landlords of different leases in various different ways, including (i) resetting rent to a turnover percentage (ii) keeping rent intact and (iii) reducing rent to nil. Landlords are given the flexibility to terminate leases within a prescribed period where they identify a tenant prepared to pay better rent (important to ensure the landlord's proprietary right is not interfered with). In a CVA, all unsecured creditors are invited to vote.

Re Zoom UK Distribution Ltd (in administration); Wessely and another (in their capacity as joint administrators of Zoom UK Distribution Ltd (in administration)) v Rubra and others

The UK courts' latest attempt to grapple with the effects of a defect in the way administrators are appointed was recently resolved in favour of the administrators.

We are hopefully now beginning to move out of the various lockdowns and restrictions that have been put in place to deal with the pandemic.

As things begin to return to some form of "normality", businesses might begin to feel some sort of relief. However, the inevitable consequence of normality returning is that some of the temporary rules that have been put in place to assist businesses through these difficulties will fall away.

R3, trade body for insolvency and restructuring accountants, said the first quarter of 2021 had seen a sharp fall in companies and individuals becoming bankrupt.

Corporate insolvencies in January to March fell by 31 per cent on the preceding quarter.

The figure was 63 per cent lower than the first quarter of 2020.

The Insolvency Service published its quarterly insolvency statistics for the period January to March 2021 (Q1 2021) on 30 April 2021. By way of comparison, see our previous update on the Q4 2020 statistics here.

The published statistics for the first quarter of 2021 continue the downward trend seen in the previous 12 month period, with company insolvencies falling overall by 22% from the previous quarter.

The National Company Law Appellate Tribunal (NCLAT) has held that priorities amongst the secured creditors (first charge or second charge) will not prevail in distribution of assets in liquidation, in a case where the creditors had elected for relinquishment of security interest and for distribution of assets according to Section 53 of the Insolvency and Bankruptcy Code, 2016.