Additional conditions will be imposed on administrators seeking to dispose of a company’s business or assets to a party connected to the insolvent company within 8 weeks of their appointment, for administrations beginning on or after 25 June 2021. Equivalent provisions have been in force in Great Britain since 30 April 2021.
Summary
Affected sales will be subject to either
(1) prior creditor approval or
(2) prior review by an independent evaluator.
A winding-up petition allows a company’s creditors to attempt to recover money owed to them by having the company’s assets sold, with the proceeds used to pay outstanding debts. It is a serious step and should only be undertaken as a last resort.
The Council of Ministers has approved the creation of the Fund for the Recapitalisation of Companies Affected by COVID-19 (the "FREAC"), which will be funded with 1,000 million euros and will be managed directly by COFIDES. The purpose of the FREAC is to provide a temporary public support under criteria of profitability, risk and impact on sustainable development, in order to strengthen the solvency of medium-sized companies with registered offices in Spain.
Restructuring & Insolvency analysis: The creditors of New Look Retailers Ltd (NLR) approved a company voluntary arrangement (CVA) that disproportionately impacted on a number of NLR’s landlords. The compromised landlords challenged the CVA on numerous grounds. In dismissing the application, Mr Justice Zacaroli held that the CVA was valid, notwithstanding that it sought to treat various creditors in different ways, and that challenges pursuant to section 6 of the Insolvency Act 1986 (IA 1986) failed.
The Department of Enterprise, Trade and Employment has published the General Scheme of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021. The General Scheme of the Bill amends the Companies Act 2014 to provide for a rescue process specifically designed for small and micro enterprises known as the Small Company Administrative Rescue Process (“SCARP”). Up to 98% of companies fall within the definition of small and micro enterprises and thus have the option to avail of the process where the eligibility criteria are met.
Three weeks spent entirely at home seemed daunting at the time (little did we know…) and the prospect of wholesale business closures soon gave rise to serious concerns about the potential impact which those closures would have on the wider economy.
The Government’s roadmap out of lockdown signals a return to trading for a number of businesses hard-hit by the COVID-19 pandemic. There is however potential for heightened financial distress in the coming period as existing support measures are withdrawn and currently deferred liabilities become payable, bringing the challenges faced by this sector into sharp focus.
Following in the footsteps of the New Look CVA challenge judgment (see our blog here) it was not unsurprising that Zacaroli J dismissed all but one of the landlord challenge claims when handing down his judgment in Regis.
Following the landmark decision by Justice Trower in Re DeepOcean 1 UK Ltd,1 Justice Snowden delivered another important judgment on the use of cross-class cram downs as he sanctioned the Virgin Active2 restructuring plans.
On 12 May 2021, the UK Government introduced the snappily titled “Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill”.