Following the government's extension of the restrictions on winding-up petitions until 30 June 2021, it is useful to note two recent cases that have considered the COVID-19 test that currently applies to winding-up petitions. In the first case, the judge took the view that the low threshold test for determining whether COVID-19 had had an impact on the financial position of the company was to be taken as settled law. In the second case, the judge offered some helpful insight into the meaning of 'financial effect'.
With fairly swift measure, the House of Commons approved the pre-pack regulations confirming that, with effect from 30 April 2021, before a pre-pack sale can complete, creditor approval or an independent written report from an evaluator will be required. However, who the evaluator will be remains one of the biggest unknowns.
Many listed companies are now starting to prepare for the 2021 annual general meeting (AGM) season and plan their next annual report. This article summarises some of the key agenda items for 2021, including with regard to AGM arrangements, shareholder engagement, remuneration, climate, diversity and the COVID-19 pandemic.
At the start of 2020, no one could sensibly have predicted the significant and far-reaching impact of COVID-19. This article looks back at 2020 and looks forward to what the UK restructuring market can expect in 2021 considering the new insolvency laws, expected rule changes, pre-pack sales and practice and procedural points.
Increasing pressures placed on those operating in the retail and hospitality sectors as a result of COVID-19 means that there is likely to be an increasing use of company voluntary arrangements (CVAs) in these sectors. The intention would be to help support and restructure businesses in distress, but could retailers use a CVA as a mechanism to rewrite the terms of their leases?
The Northern District of Illinois recently declined to stay an action for declaratory relief relating to an insurance coverage dispute arising out of the ongoing Clearview litigation. The court held that the determination of whether an insurance policy applied did not require the resolution of facts relating to the policyholder's alleged violations of Illinois's Biometric Information Privacy Act.
A recent case is a cautionary reminder to qualifying floating chargeholders (and their advisers) to review the terms of all security documents before seeking to appoint an administrator. In this case, failure by junior chargeholders to obtain consent from senior chargeholders (as required under a deed of priority) prior to the appointment of administrators led to the court finding that the out-of-court appointment of administrators was invalid (as opposed to being a procedural irregularity that could be cured).
Quistclose trusts classically arise in situations where loans are made for a specific purpose. Disputes over Quistclose trusts often arise in insolvency situations. In a recent case, the High Court found that a Quistclose trust had arisen in a situation where solicitors were forwarded monies by a third party for a specific purpose.
In a recent case, Insolvency and Companies Court Judge Jones dealt another blow to qualified floating charge holders' (QFCH's) control by finding that failure to serve a notice of intention to appoint administrators by directors of a company on a QFCH does not automatically void an administration. This finding may come as a surprise given that the reason for giving notice is to enable a QFCH the opportunity to appoint its preferred choice of administrator.
The government recently published a report reviewing voluntary measures introduced in 2015 to improve the transparency of pre-pack sales in administration. The voluntary measures sought to improve creditor confidence, enabling connected person purchasers to voluntarily obtain an independent opinion from the Pre-Pack Pool that the proposed sale was the best option. The government's report notes that despite these measures, pre-packs are still a concern.
Numerous recent extensions and changes to temporary measures have been announced that affect insolvency practice and procedure. These concern the ipso facto regime for small suppliers, the Corporate Insolvency and Governance Act 2020, the temporary restrictions affecting winding-up petitions, the prohibition on forfeiture proceedings and the revised Temporary Insolvency Practice Direction.
The Finance Act 2020 recently received royal assent, confirming the anticipated but opposed intention to restore Her Majesty's Revenue and Customs (HMRC) as a secondary preferential creditor on insolvency. From 1 December 2020 HMRC's claim will sit ahead of floating charge holders and unsecured creditors, reducing the monies available for distribution to both when a corporate files for insolvency. But what does this mean for secured lenders and corporates?
The Corporate Insolvency and Governance Act 2020 recently came into force. Alongside this act, a new insolvency practice direction (IPD) came into force and provides additional information on winding-up petitions and the 'coronavirus test'. This article examines a few of the key changes contained in the IPD.
The Coronavirus outbreak may result in an upsurge of force majeure-related claims under commercial contracts. A further risk now coming to light is customers seeking to enforce contractual fines, penalties, service credits or liquidated damages in connection with supplier failure or delays arising from coronavirus-related issues. As such, a reminder of the law in this area now also feels appropriate.
In 2018 the Court of Appeal rejected a stockbrocker's appeal against the High Court's decision that it owed a client a Quincecare duty. In a recent ruling, the Supreme Court upheld the Court of Appeal's decision. The client's Quincecare claim was held not to have been defeated by illegality as, in the circumstances, the fraud of a sole shareholder of a company should not be attributed to the company itself.
In November 2019, in the looming shadow of the collapse of Thomas Cook Group plc, the Business, Energy and Industrial Strategy (BEIS) Committee published a letter of recommendations to Secretary of State for the Department of BEIS Andrea Leadsom. The letter follows BEIS's inquiry into the collapse of Thomas Cook and the factors that led to the global travel group's downfall and covers a range of recommendations relating to corporate governance, audit reform and executive pay and bonuses.
A series of recent cases have examined the circumstances in which a dividend can be challenged on the basis that it has been unlawfully paid. In one such case, the High Court considered a number of key principles regarding dividend payments and the circumstances in which directors can be pursued for dividends paid prior to an insolvency. This judgment provides some comfort to directors who rely on professional advisers to determine whether to declare a dividend payment.
The draft Companies (Directors' Remuneration Policy and Directors' Remuneration Report) Regulations 2019 were recently published as part of the drive to encourage long-term shareholder engagement and to strengthen the governance and performance of traded companies. Most of the directors' remuneration reporting requirements inserted by the EU Shareholder Rights Directive II already apply under UK law and the draft regulations will implement most of the requirements that do not currently apply.
The Pensions and Lifetime Savings Association recently published guidance on market best practice to assist its members when exercising their vote at annual general meetings in 2019. The revised version of its Corporate Governance Policy and Voting Guidelines reflects the introduction of the 2018 UK Corporate Governance Code, which applies to financial years beginning on or after 1 January 2019.
Small businesses often structure payments to directors who are also shareholders using a combination of dividend payments and salaries. At a time when corporate governance and director and shareholder accountability are under review, a recent Court of Appeal decision gives more reason for directors to ensure that they understand not only their obligations and duties as directors under the Companies Act 2006, but also the implications of relying solely on advice without evaluating it first.