This article summarises the findings of the High Court in Re gategroup Guarantee Limited [2021] EWHC 304 (Ch) (Re gategroup Guarantee Limited) and provides a view of its effects on the cross-border application of the Restructuring Plan (defined below) and the use of co-obligor structures in restructurings.
The Restructuring Plan
Essential points to consider if your company is looking at ways to improve balance sheet strength, whether strategically, opportunistically, or to help repair the damage done by the pandemic.
60 SECOND BASICS
WHAT IS IT
WHITE PAPER A Multifaceted Maze: The FCA’s Role and Powers in Distressed Situations The last five years have seen a substantial increase in the number and variety of regulated firms operating in the United Kingdom, with the development in particular of financial services provided by new technology firms, asset managers, challenger banks, payment providers and e-money issuers. At the same time, an increasing number of UK Financial Conduct Authority (“FCA”) regulated firms have entered into insolvency proceedings.
As of Q1 2021, vaccines have started to reduce hospitalisations in numerous countries, but global variations in vaccine manufacturing, distribution, procurement and adoption ensure that 2021 will be a year of patchwork ‘new normals’ worldwide. New, more infectious and potentially more robust variants may render COVID-19 endemic, further fragmenting governments’ response. Despite the prominence of the pandemic, other issues (such as Brexit and data protection) have also been notable within searches.
A quick recap
In March 2020 the UK Government imposed unprecedented restrictions in the face of the Covid-19 pandemic in relation to the forfeiture of commercial leases by enacting the Coronavirus Act 2020 and other business support measures. These introduced the following key restrictions on rent arrears recovery:
On 15th September 2020, the Companies Act (Suspension of Filing for Dissolution and Winding Up) Regulations (the ‘Regulations’) were introduced as part of several other measures intended to protect local businesses from the adverse economic impact brought about by the COVID-19 pandemic. They became applicable retrospectively as from 16th March 2020.
IMPACT ON CREDITORS AND SHAREHOLDERS
Directors of companies have been facing, and continue to face, extremely challenging circumstances due to the financial impact of the coronavirus pandemic. The decisions they have taken through the pandemic to date have been made against a backdrop of unknowns: unknown closure durations, unknown projections and uncertain futures.
Both businesses and individuals have suffered financially throughout 2020 as a consequence of the coronavirus pandemic.
There has been a significant increase in the use of CVAs, in particular in the retail and hospitality sector over the last 12 to 24 months, largely impacting landlord creditors. Consequently, there has been an increase in landlords challenging CVAs.
Landlords (and other creditors) may apply to court to challenge a CVA on the grounds of material irregularity or unfair prejudice.