New legislation has been introduced in the UK which restricts the rights of parties to construction contracts to terminate or even suspend work. This means that even if your contract says you can terminate or suspend – for example, for non-payment – you may not in the future be able to exercise this right. These reforms are likely to lead to significant changes to how parties operate their contracts and credit lines.
This alert was written by Geoffrey Wynne, Alexandra Shipulina and Szonja Kolbenheyer (trainee solicitor)
The Act
The Corporate Insolvency and Governance Act 2020[1] ("the Act") received Royal Assent on 25 June 2020. The overarching purpose of the Act is to protect as many businesses as possible from falling into administration or insolvency as a result of the disruptions and hardship caused by the pandemic.
This judgment provides some guidance in relation to the scope and application of s283A IA86, which gives a bankrupt’s trustee in bankruptcy three years to take the necessary steps to realise or secure the bankrupt’s interest in the bankrupt’s home failing which that interest will cease to be part of the estate and will automatically revest in the bankrupt.
In this case the court was concerned with the meaning of the phrases (a) ‘an interest in’, (b) ‘a dwellinghouse’ and (c) ‘sole or principal residence’ under s283A(1).
The COVID-19 pandemic has already led to business failures and forced others into negotiations with lenders, landlords and other stakeholders. For many sectors, the crisis has reinforced or accelerated the challenges that they were already facing. Government support measures including loans, furlough and temporary legislative changes have delayed some of the usual pressure points, but as support is eased, many businesses will have to find cash from significantly reduced turnover to satisfy deferred liabilities or repay loans.
The recent High Court decision in Hellard & Anor v Registrar of Companies & Ors [2020] EWHC 1561 (Ch) (23 June 2020) serves as a useful reminder to any party seeking the restoration of a company to the Register of Companies that it is important first to consider whether such party has the requisite standing to make the application.
This was an application by the administrators of Lehman Brothers International (Europe) Ltd for a direction under paragraph 63 of Schedule B1 IA86 that they be at liberty to consent to a request from the company’s directors to distribute surplus funds to the company’s sole shareholder.
The Court has granted one of the first Winding Up Orders under CIGA 2020.
The winding up petition had been issued on 1 May 2020, 8 weeks before CIGA 2020 came in to force, but after 27 April 2020, the date from which CIGA 2020 applies retrospectively. As a result, the petitioner could not have ensured that the winding up petition satisfied the requirements of CIGA 2020, as those requirements were not in existence at the time that the petition was presented.
The liquidators of a subsidiary company had submitted a proof in the CVA of the parent company. The proof was based upon a claim under section 239 of the Insolvency Act 1986 (IA86) that certain payments by the parent to the subsidiary had amounted to unlawful preferences of the company. The liquidators appealed against the decision by the supervisor of the CVA to reject that proof.
Following the Insolvency Service’s announcement that it will produce monthly (as opposed to quarterly) company and individual statistics for England and Wales, to assist the Government and the insolvency sector in monitoring the impact of COVID19, the results for July showed that:
The Department for Business, Energy & Industrial Strategy (BEIS) has recently issued a press release regarding proposed changes in the law to better protect consumers in the event that a company, and in particular a retailer, becomes insolvent.
Under existing law, if a company becomes insolvent but goods prepaid for are still in its possession, they may be considered as assets belonging to the business and can be used by administrators to pay off the company’s debts.