Delaware Bankruptcy Court Decision Supports Pathway to Make Chapter 11 Cases Less Expensive

By Maura McIntyre on July 16, 2021 Posted in US

Section 1930(a)(6) of Title 28 requires the payment of quarterly fees to the United States Trustee (the “UST”) for each quarter that a bankruptcy case is open. The amount of fees is calculated based on the amount of disbursements made by the debtor during each quarter. But, are these fees payable when a trust, established by a confirmed plan, makes distributions rather than a debtor? This question was answered recently by Delaware Chief Bankruptcy Judge Sontchi who entered a letter ruling denying the UST’s motion to compel payment of additional fees under section 1930 for distributions made by a litigation trustee. Judge Sontchi’s ruling is likely to have an immediate impact upon plans of liquidation and post-confirmation trust documents. Continue Reading

UK Business Viability: Our Guide To Director Duties, Managing HMRC and Financial Support

By Rachael Markham on July 14, 2021 Posted in UK

Wooden singpost with "help, support, advice, guidance" arrows against blue sky. Freedom day (or the 19th of July) is almost upon us, and therefore light at the end of what has been a very long tunnel for UK businesses who will once again be able to operate free of restrictions and lockdown measures. However there is still an element of uncertainty about what the future holds given the tough journey that many businesses have been on over the last, almost, 18 months.

It won’t come as a surprise that there is an estimated £6bn in rent arrears. Many businesses have accrued other debt, through additional bank borrowings and government back loans, as well as deferred liabilities, such as those due to HMRC. There are still measures in place to support businesses as they come out of the tunnel to avoid toppling the economy, such as restrictions on winding up petitions and forfeiture action by landlords, and the possibility of agreeing time to pay tax arrears with HMRC.

CVAs: Valuation and Discounting of Landlord Claims (UK)

By Rachael Markham on July 12, 2021 Posted in UK

In this third alert Shoppers walking down the high street , we consider the findings in the New Look and Regis CVA challenge cases from the point of view of valuing landlord claims, counting the votes of unimpaired creditors and disclosure. Both of these challenges cases alleged that there has been non-disclosure, and therefore a material irregularity, and challenged the way that the landlords’ claims had been valued for voting purposes and objected to counting the votes of unimpaired creditors (i.e those creditors who are usually paid in full). Although the findings in both of these cases are fact specific there are some helpful pointers in the judgment about what they can expect when it comes to voting and disclosure.

New Look and Regis from a UK Insolvency Practitioner’s Perspective

By Rachael Markham on July 7, 2021 Posted in UK

In our second alert in the series we consider the key takeaways for UK insolvency practitioners following the CVA challenges in New Look and Regis. Our alert considers the following:

Nominee’s duties
Risks to fees
Disclosure requirements
Discounts and formulas for calculating landlord claims for voting purposes; and
The shape of post-pandemic CVAs

To read our first alert considering the outcome of the judgments from a landlord’s perspective click here.

CVAs: A Landlord’s Perspective on Rent Reductions and Lease Modifications

By Rachael Markham on July 6, 2021 Posted in UK

Following the pivotal decisions in the New Look and Regis CVA challenge cases, where do the findings in those cases leave retailers, landlords and insolvency practitioners?

In a series of alerts we will consider the key takeaways for landlords, the position of retailers and the impact of the findings for insolvency practitioners.

Albeit that the landlords were largely unsuccessful in their arguments in New Look and Regis, the findings did not permanently close the door on arguments of unfair prejudice regarding the treatment of landlord claims in a CVA, and our first alert looks at rent reductions and lease modifications from the landlord’s perspective.

Small suppliers no longer sheltered from the UK “ipso facto” regime

By Emily Davis on July 5, 2021 Posted in UK

Last year, the Corporate Insolvency and Governance Act 2020 made a number of changes to the UK insolvency landscape. Amongst the changes, was the addition of the “ipso facto” regime, which prevents suppliers terminating supply contracts as a result of insolvency-related events. Up until 30 June 2021, “small suppliers” were exempt from the regime. However, now the exemption has ended, what does that mean for those suppliers that were formally exempt? Continue Reading

UK Directors: beware of your personal risk as wrongful trading suspension ends

By Rachael Markham on July 2, 2021 Posted in UK

From 1 March 2020 until 30 June 2021, the rules on wrongful trading were suspended – albeit there was a short period between 1 October 2020 and 25 November 2020 where they did apply.

The temporary suspension has now lapsed, meaning that the courts will no longer assume that a director was not responsible for any worsening of the financial position of the company from 1 July 2021 onward.

For any directors who may have taken a more relaxed approach to their directors duties during this period, they should ensure that they fully understand and comply with their obligations and duties moving forward to minimise and hopefully avoid personal liability. Our quick guide to director duties provides a helpful overview of those duties.

HMRC Announces “Cautious Approach” to Recovering UK Tax Debts

By Robert O'Hare on June 23, 2021 Posted in UK

HMRC form with money We highlighted in our previous blog, the pivotal role that HMRC could play in ensuring the survival of UK businesses when all COVID restrictions are lifted and the government’s various temporary support measures come to an end.

The Business Secretary, Kwasi Kwarteng, has now assured business that HMRC will take a “cautious approach” to recovering tax debts that have accrued during the pandemic and will only take steps to enforce payment as a last resort. In the week that the deadline for businesses to sign-up to the extended VAT deferral repayment scheme expired, this will be welcome news for many companies. Given the cash-flow challenges, and the levels of debt that have inevitably been built up during the pandemic, it may take some time before viable businesses are in a stable enough position to make full repayments.

It is expected HMRC will publish more detail on their updated approach to enforcement soon. As soon as they do, we will share further details. Nonetheless, the underlying message remains clear: HMRC will still seek to recover taxes due and payable from businesses that can afford to pay them and although HMRC will now take a “cautious approach”, companies must engage with HMRC (and should do so as soon as possible), to protect themselves against avoidable recovery proceedings being initiated.

Our previous alert explains in more detail how HMRC’s ‘time to pay’ arrangements work. We expect ‘time to pay’ to continue to play a vital role as an available source of ongoing business support.

Will the new UK legislation to manage COVID rent arrears help landlords and tenants and avoid an insolvency cliff edge?

By Rachael Markham on June 18, 2021 Posted in UK

There is a faint light at the end of the COVID tunnel for commercial landlords regarding timings and the ability to recover unpaid rent arrears. The UK Government has announced an extension to the current prohibition on forfeiture and winding up petitions, to enable it to introduce new legislation to help manage the £6bn estimated rent arrears.

The announcement provides a clearer pathway for both landlords and tenants, many of whom have paid no, or little rent since March 2020 as a consequence of the various Government imposed lockdowns.

The new legislation intends to “help tenants and landlords work together to come to an agreement on how to handle the money owed – this could be done by waiving some of the total amount or agreeing a longer-term repayment plan”.

Updated: UK Business Viability Guide – understanding director risks and challenges

By Emily Davis on June 15, 2021 Posted in UK

Sorry We're Closed As a result of the rapid spread of the Delta variant of COVID-19, the UK Government has announced a four-week delay to the easing of COVID-19 restrictions in England and the Step 3 restrictions will remain in place for now. The Government’s intention is that England will move to Step 4 (the lifting of all restrictions) on 19 July, but it has promised to review the data again in two weeks in case the risks have reduced. For many businesses, the delay to “freedom date” may be a significant blow, with some businesses being unable to open or being required to operate at reduced capacity.

For directors, one of the most difficult challenges is ensuring compliance with their directors’ duties when making decisions about the future of the business. If the business is at risk, their own personal liability might also be at risk.

In light of the announcement, we have updated our business viability guide to assist directors in understanding risk and upcoming challenges: cash requirements, financial pressure points, employees, tax and directors’ duties.