It seems that business disruption due to coronavirus is pretty inevitable. What should you as a company director be doing if the disruption means your business starts to suffer?

What changes for me as a director?

As a director, you know that you owe duties to the company. When the business starts heading towards insolvency, there is a change of emphasis and instead of doing what is best for the shareholders, you have to change and consider what the consequences of your actions will be for the company’s creditors.

In last week's Government budget, the Chancellor of the Exchequer confirmed that Crown preference would return but that this would be delayed to 1 December 2020. We previously wrote about Crown preference in November 2018 when the Government first suggested its return. That post, which is available here, is a handy summary of what Crown preference is and its impact on secured creditors.

Introduction

Hot on the heels of our April 2020 article on the proposed reintroduction of the Crown preference, Parliament has recently approved legislation that will increase the ring-fenced amount available to unsecured creditors on an insolvency of a company from £600,000 to £800,000.

These key action points take into account the UK Pensions Regulator's recent statement on COVID-19. Trustees and employers should continue to monitor further updates from the Regulator.

Defined benefit (DB) arrangements

The UK Parliament made an Order on 3 March 2020 which increases the prescribed part, payable to unsecured creditors from floating charge recoveries on the insolvency of a company from £600,000 to £800,000.

Back in August 2018, in its paper entitled “Government Response: Insolvency and Corporate Governance” (the 2018Paper) the Government responded to its consultation on ‘Insolvency and Corporate Governance‘ with the announcement of several reforms and proposed next steps.

The UK Parliament made an Order on 3 March 2020 which increases the prescribed part, payable to unsecured creditors from floating charge recoveries on the insolvency of a company from £600,000 to £800,000.

Back in August 2018, in its paper entitled “Government Response: Insolvency and Corporate Governance” (the 2018 Paper) the Government responded to its consultation on ‘Insolvency and Corporate Governance' with the announcement of several reforms and proposed next steps.

Last September we reported on the Court’s decision on the landlords’ challenge to the Debenhams CVA on grounds of unfair prejudice and material irregularity, in respect of which the landlords have now successfully obtained permission to appeal on various grounds (see below).

A recent English case has considered for the first time whether and if so to what extent the general duties of a director survive a company’s entry into an insolvency process.

Summary and Key Takeaways