The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.

That's straightforward enough for a liquidator, right?

Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.

In Short

The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").

The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.

The Corporate Insolvency and Governance Act 2020 (“the Act”) came into force on 25 June 2020 making sweeping changes to the current insolvency legislative framework. This article will focus on Section 14 of the Act and its effect on suppliers of insolvent companies. These provisions had been in consideration for some time before the pandemic. They are permanent provisions unlike some other provisions in the Act which appear to have been brought in on a temporary basis as part of the government’s support package for businesses.

The effect of Section 14

Since Richard Branson’s Virgin Atlantic Airways Ltd’s request for Government loan was denied (see the post by my colleague, Jess), the airline has announced plans for a private-only solvent recapitalisation to "rebuild its balance sheet" and "welcome passengers back".

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

Assuming the Pizza Express company voluntary arrangement (CVA) follows the approach taken by other casual diners and retailers who have also launched CVAs recently, we can predict with some confidence what the Pizza Express CVA proposal might say.

With the Company Insolvency and Governance Act 2020 (CIGA 2020) grabbing all the headlines, the Finance Act 2020 (FA 2020), which received Royal Assent on 22 July, has gone somewhat under the radar. However, it has the potential to have an even greater impact on the restructuring market than CIGA 2020.

The two principal measures being brought in are:

The Finance Act received Royal Assent on 22 July 2020, bringing in significant changes for the restructuring market, as well as businesses that become insolvent.

The two principal measures being brought in are:

It has been a strange summer yet all too soon the nation is deflating paddling pools, spending the national debt of a small country in shoe shops and fervently sewing on name tapes as September and a new academic and then legal year approach. We hope many of you have managed some sort of break from home working / living at work despite all the difficulties with travel this summer. We were particularly tickled when one of our clients suggested setting an "out of spare room" autoreply on his email, rather than "out of the office".

The United Kingdom and Australia have recently implemented legislative changes to permit external administrators to assign or sell causes of action available to them.