Introduction
The ongoing pandemic will cause upheaval across all markets and sectors. Business models may become unviable. Sound businesses will suffer short-term liquidity crises. Customer behaviour may alter. Distress opportunities can create opportunity if buyers can work to an accelerated timeline.
1. IT'S NOT JUST INSOLVENCY
The Finance Act 2020 received Royal Assent on 22 July confirming the Government’s intention to restore HM Revenue & Customs (HMRC) as a secondary preferential creditor in insolvencies. From 1 December 2020, HMRC’s claims for unpaid employer NIC, PAYE and VAT will rank ahead of floating charge holder claims and unsecured creditors, reducing the monies available for distribution to lower ranking creditors.
New legislation has been introduced in the UK which restricts the rights of parties to construction contracts to terminate or even suspend work. This means that even if your contract says you can terminate or suspend – for example, for non-payment – you may not in the future be able to exercise this right. These reforms are likely to lead to significant changes to how parties operate their contracts and credit lines.
This alert was written by Geoffrey Wynne, Alexandra Shipulina and Szonja Kolbenheyer (trainee solicitor)
The Act
The Corporate Insolvency and Governance Act 2020[1] ("the Act") received Royal Assent on 25 June 2020. The overarching purpose of the Act is to protect as many businesses as possible from falling into administration or insolvency as a result of the disruptions and hardship caused by the pandemic.
This judgment provides some guidance in relation to the scope and application of s283A IA86, which gives a bankrupt’s trustee in bankruptcy three years to take the necessary steps to realise or secure the bankrupt’s interest in the bankrupt’s home failing which that interest will cease to be part of the estate and will automatically revest in the bankrupt.
In this case the court was concerned with the meaning of the phrases (a) ‘an interest in’, (b) ‘a dwellinghouse’ and (c) ‘sole or principal residence’ under s283A(1).
The COVID-19 pandemic has already led to business failures and forced others into negotiations with lenders, landlords and other stakeholders. For many sectors, the crisis has reinforced or accelerated the challenges that they were already facing. Government support measures including loans, furlough and temporary legislative changes have delayed some of the usual pressure points, but as support is eased, many businesses will have to find cash from significantly reduced turnover to satisfy deferred liabilities or repay loans.
The recent High Court decision in Hellard & Anor v Registrar of Companies & Ors [2020] EWHC 1561 (Ch) (23 June 2020) serves as a useful reminder to any party seeking the restoration of a company to the Register of Companies that it is important first to consider whether such party has the requisite standing to make the application.
So you have a freezing order against a start-up company, now what? Can that start-up use the assets which are the subject of your order, or any of its other assets, to continue to pursue its risky business, or must it stay idle and wait for the inevitable?
The tragically unforeseen current novel coronavirus (COVID-19) global pandemic has brought unprecedented challenges to all aspects of Hong Kong society including the health of its citizens, the economy and the business community. Economic activities across most sectors globally are being devastated. The dire economic situation in Hong Kong has been exacerbated by the trade war between Washington and Beijing and the new national security law.