What’s changing?

Businesses like safeguards when they enter into any venture with a third party. For example, they like to have the option of exiting an arrangement with a business that has run into financial difficulties – so that they can avoid any related obligations and risks. UK contracts therefore often include a mechanism to allow termination of an agreement if a party enters into an insolvency process (e.g. administration). However, an imminent change to UK law means that this will not always be an option in the future.

The new UK legislation for companies in financial difficulty represents a fundamental shift in approach to restructuring in Europe and adds an important new tool to the UK restructuring framework. The availability of a plan proposed under the new Part 26A of the Companies Act 2006 (a “Restructuring Plan”) will undoubtedly change how many distressed companies seek to address their financial difficulties. However, until case law is developed, there will remain considerable uncertainty as to how the Restructuring Plan will work in practice.

1. Summary

The Supreme Court decision in Bresco Electrical Services Ltd (In Liquidation) v- Michael J Lonsdale Electrical Ltd handed down on 17 June 2020 is both timely and significant given the "new normal" that we are all now operating within. In the current economic climate of "lockdown" and the present economic downturn that is now occurring, the worlds of construction and insolvency are now likely to interact and collide on a more frequent basis.

There may now be little time for the voluntary re-scheduling of lease payments due on and after the June 2020 quarter day. Andrew Walker QC explores the reasons why. 

Lexology Pro Compliancetakes a look at some of the most informative articles published on Lexology this fortnight for compliance teams to stay up-to-date, including key guidance from regulators around the world and practical tips to help businesses adapt to a new normal.

For some time we have been following with interest the case of Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd as it progresses through the courts. Why? Because this concerns an important question which comes up time and time again: are the regimes of construction adjudication and insolvency set off compatible?

For leaders of businesses in these extraordinary times, focus shifts to exposure to risk and for many the eligibility to receive government's support, but for others whether there are opportunities to capitalise on. Whilst experience of past economic disruptions provides some insight into what could happen, the current situation is unprecedented and priorities should be considered including the viability of a business.

Bresco Electrical Services Ltd (In Liquidation) -v- Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25

The recent Court of Appeal judgment in the case of Ezair v Conn [2020] EWCA Civ 687, handed down on 1 June 2020, has reiterated that section 234 of the Insolvency Act 1986 (“IA 1986”) provides only a summary procedure to assist insolvency office-holders in the exercise of their statutory duties. The Court made clear that section 234 IA 1986 does not provide scope for the determination of complex legal issues relating to the property in question.

The Government is in the process of pushing the Corporate Insolvency and Governance Bill through Parliament, with it anticipated to become law later in June. The Bill represents the biggest overhaul of the UK’s insolvency legislation for over 30 years.