When CIGA came into force over a year ago it turned the insolvency world on its head. It introduced never-before-seen measures to help companies deal with the immediate impact of the coronavirus pandemic and to provide new corporate restructuring tools to try to help companies survive and prosper.
When CIGA came into force over a year ago it turned the insolvency world on its head. It introduced never-before-seen measures to help companies deal with the immediate impact of the coronavirus pandemic and to provide new corporate restructuring tools to try to help companies survive and prosper.
Those measures include a temporary restriction on statutory demands and winding-up petitions as well as a temporary suspension of liability for wrongful trading.
The prohibition on statutory demands and restrictions on winding-up petitions have been repeatedly extended since they came into effect on 1 March 2020. Whilst not a complete barrier to action, CIGA imposed additional requirements to justify and limit the use of winding-up petitions.
The measures were necessary, and the success of that approach is borne out in the insolvency statistics which have consistently shown low levels of corporate insolvencies over the last 15 months. Questions remain over how businesses will cope without these measures and whether they have simply delayed the inevitable rather than preventing it.
The measures will expire in 3 weeks on 30 June 2021 and it is unclear whether they will be extended again to coincide with the end of the furlough scheme in September 2021.
Whatever happens, directors should use the time available now (whether its 3 weeks or 3 months) to make a plan, based on up to date cash-flows and forecasts and, if necessary, professional advice, for dealing with or, at least, mitigating the risks that lie ahead. That might include how to service current, deferred or contingent liabilities (both new and old) and the proper approach to decision-making to comply with a director’s duties and avoid any personal liability attaching to the directors.
In a judgment handed down yesterday the Supreme Court has affirmed that a so called “creditor duty” exists for directors such that in some circumstances company directors are required to act in accordance with, or to consider the interests of creditors. Those circumstances potentially arise when a company is insolvent or where there is a “probability” of an insolvency. We explore below the “trigger” for such a test to apply and its implications.
The Supreme Court has unanimously dismissed the BTI v Sequana appeal and reviewed the existence, content and engagement of the so-called ‘creditor duty’; being the point at which the interest of creditors is said to intrude upon the decision-making of directors of companies in financial distress.
In an unreported case (Re Active Wear Limited (in Administration)), the High Court has ruled that an out-of-court administration appointment, instigated by a sole director of a company with unmodified model articles, was valid notwithstanding the earlier decision of Deputy Judge Farnhill (also in the High Court) in the case Hashmi v Lorimer-Wing (also known as Re Fore Fitness Investments Holdings Ltd) [2022] EWHC 191 (Ch) (02 February 2022).
We welcome you back after the festive break to our first Private Sector Development Club of the year. Join us on-demand for four high level presentations with a chance for you to ask questions to our experts.
A number of interesting developments have emerged from what was quite a run-of-the-mill insolvency application brought by a litigation funder assignee.
When CIGA came into force over a year ago it turned the insolvency world on its head. It introduced never-before-seen measures to help companies deal with the immediate impact of the coronavirus pandemic and to provide new corporate restructuring tools to try to help companies survive and prosper.
When the EU and UK introduced more rigorous financial regulation in the 2010s, they addressed potential risk at banks before turning to insurance. Rule changes following Brexit may occur in the opposite order as the UK is mulling ways to relax the prudential framework for insurers established by the Solvency II Directive.
The new Part A1 moratorium was introduced partly in response to the Covid-19 pandemic and its impact on businesses. The moratorium is not intended to be used to simply delay the inevitable insolvency of a company, but rather to allow breathing space for that company to restructure and/or achieve an effective rescue.
The Government is consulting on plans to modernise the country’s audit and corporate governance regime, building on the recommendations of three recent independent reviews with the goal of restoring business confidence by implementing reforms to improve the quality of corporate reporting.
From 26 March 2021 the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 will come into force with the effect of extending several of the temporary measures brought in by the Corporate Insolvency and Governance Act 2020 (CIGA).
This note provides a general overview of administration and what options are open to local authorities.
A creditor who has a genuine interest in the outcome of a case would be wise to find the time to register on the insolvency practitioners online portal.
From 1 December 2020, HMRC will once again benefit from preferred creditor status in the event of an insolvency. This means that, regardless of the date of any pre-existing security, HMRC will rank ahead of the general body of unsecured creditors and floating charge holders in respect of certain taxes (including VAT, PAYE and employee’s NIC but not Corporation Tax).
Two recent judgments demonstrate the risk that directors (of insolvent companies) face of being personally liable if appropriate records and procedures are not followed and if it cannot be shown that certain payments were in the interests of the company.
On 20 May 2020, the UK government published the long-awaited Corporate Insolvency and Governance Bill (the Bill) to implement the temporary measures announced by the Business Secretary on 28 March 2020 and the long planned measures contained in the government’s consultation in August 2018.
Find out more about the confusion around the Government’s support measures for business tenants and what to do if you have a break right during lock down.
On Saturday, 28 March 2020, Business Secretary, Alok Sharma MP, announced changes to the insolvency regime as part of the governments overriding objective.
