Summary
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the Regulations) are effective from 4 May 2021. Whilst this will provide residential tenants with additional procedural protection in respect of rent arrears, this will be an unwelcome additional hurdle to landlords.
What do the Regulations do?
On 24 March 2021, further extensions were announced to the range of government measures aimed at protecting UK companies and directors affected by COVID-19.
Measures extended to 30 June 2021
The Corporate Insolvency and Governance Bill was published on 20 May 2020 and went through an accelerated parliamentary process, receiving Royal Assent on 25 June 2020 (with the provisions coming into force on 26 June 2020).
The Corporate Insolvency and Governance Act 2020 (“CIGA”) introduces a mixture of permanent and temporary “debtor friendly” measures to restructuring and insolvency law in England and Wales and in Scotland, jurisdictions which have historically been viewed as being “creditor friendly”.
Following the UK Government extending the restrictions on winding up petitions until 30 June 2021 it is useful to note two recent cases that have considered the coronavirus test that currently applies to winding up petitions.
In its recent decision Xuereb v Weber Construction Limited Et (decided 18 March 2021) the Civil Court (Commercial Section) weighed in once more on the appropriate tests to be applied when assessing a company's inability to pay its debts under Maltese corporate insolvency law. One of Weber Construction Limited's ("Weber") shareholders filed an application in court requesting the company's dissolution and consequential winding up on the grounds inter alia that it was unable to continue to pay its debts.
The new Pre-Pack Regulations have been approved by the UK Parliament and are due to come into effect on 30 April 2021 for administrations commencing from then.
The UK government has extended its suspension of various rules and procedures affecting distressed businesses as a result of the coronavirus (COVID-19) pandemic. However, with the UK lockdown easing on a rolling basis up to 21 June 2021, these may be the last of the blanket extensions across all of these areas. Expect the gradual reintroduction of some of the rules and procedures from 1 July onwards.
The Extensions to the End of June 2021
Despite the scale of the pandemic and resulting build-up of Covid related rent arrears, currently estimated at around £4.5bn, business restructuring has been relatively muted. This is partly explained by the moratorium on forfeiture and other restrictions on landlords’ remedies, combined with unprecedented government financial support for struggling businesses.
But rent arrears cannot be pushed down the track indefinitely. As restrictions are eased and focus turns to tackling this debt, business restructuring activity will no doubt intensify.
From 30 April 2021, an administrator will be unable to complete a sale of a substantial part of a company's property to a connected person within the first eight weeks of the administration without either:
- The approval of creditors
- An independent written opinion (positive or negative)
This alert considers the impact of the new regulations in practice, which apply to both pre-packs and post-packs that take place within eight weeks of an administrator's appointment.
In 2014, Accelerated Payment Notices (“APNs”) were introduced by the Government under the Finance Act 2014, allowing HMRC to request upfront payments on account of disputed tax and/or National Insurance contributions relating to certain tax avoidance schemes.