WHITE PAPER A Multifaceted Maze: The FCA’s Role and Powers in Distressed Situations The last five years have seen a substantial increase in the number and variety of regulated firms operating in the United Kingdom, with the development in particular of financial services provided by new technology firms, asset managers, challenger banks, payment providers and e-money issuers. At the same time, an increasing number of UK Financial Conduct Authority (“FCA”) regulated firms have entered into insolvency proceedings.
As of Q1 2021, vaccines have started to reduce hospitalisations in numerous countries, but global variations in vaccine manufacturing, distribution, procurement and adoption ensure that 2021 will be a year of patchwork ‘new normals’ worldwide. New, more infectious and potentially more robust variants may render COVID-19 endemic, further fragmenting governments’ response. Despite the prominence of the pandemic, other issues (such as Brexit and data protection) have also been notable within searches.
A quick recap
In March 2020 the UK Government imposed unprecedented restrictions in the face of the Covid-19 pandemic in relation to the forfeiture of commercial leases by enacting the Coronavirus Act 2020 and other business support measures. These introduced the following key restrictions on rent arrears recovery:
On 15th September 2020, the Companies Act (Suspension of Filing for Dissolution and Winding Up) Regulations (the ‘Regulations’) were introduced as part of several other measures intended to protect local businesses from the adverse economic impact brought about by the COVID-19 pandemic. They became applicable retrospectively as from 16th March 2020.
IMPACT ON CREDITORS AND SHAREHOLDERS
Directors of companies have been facing, and continue to face, extremely challenging circumstances due to the financial impact of the coronavirus pandemic. The decisions they have taken through the pandemic to date have been made against a backdrop of unknowns: unknown closure durations, unknown projections and uncertain futures.
Both businesses and individuals have suffered financially throughout 2020 as a consequence of the coronavirus pandemic.
There has been a significant increase in the use of CVAs, in particular in the retail and hospitality sector over the last 12 to 24 months, largely impacting landlord creditors. Consequently, there has been an increase in landlords challenging CVAs.
Landlords (and other creditors) may apply to court to challenge a CVA on the grounds of material irregularity or unfair prejudice.
On 24 February, the Government published draft regulations that, if implemented, will impose new restrictions on pre-pack administration sales to connected parties. For all `substantial disposals' (which will include `pre-pack' sales) to connected parties, taking place within eight weeks of the administrators' appointment, the administrators will either need creditor consent or a report from an independent `evaluator'.
Context
Now that the UK has left the EU and the transition period ended on 31 December 2020, this briefing considers the key points of the legal and regulatory landscape from the perspective of Ireland.
Deal or no-deal?
In effect, there is both. The December 2020 EU-UK Trade and Cooperation Agreement1 (the “TCA”) includes a ‘deal’ so far as concerns EU-UK trade in many types of good. However, the TCA makes little provision for trade in services and so, broadly, it is ‘no-deal’ as regards most types of service.