Quick Guides: Changes To UK Insolvency Laws

Houses of ParliamentOn 25 June 2020 the Corporate Insolvency and Governance Act received Royal Assent, making some of the biggest changes to UK insolvency laws in the last 30 years.   We have written several blogs covering the changes and how they help support distressed businesses, impact suppliers, lenders and other third parties and have tracked the changes through the UK parliament.

Largely because of the need to implement temporary changes to help support business in distressed as a result of COVID-19 the Bill was fast tracked through parliament leaving limited time for scrutiny and change.  There are powers in the Act to enable quick changes to the Act, if the procedures don’t work as intended.  These will enable loop holes to be closed and gaps to be filled.

There were some changes to the Bill as it progressed through the Lords.  The key ones being:

  • an extension to the date the temporary measures are in force.  The temporary measures are now in place until at least 30 September 2020 meaning that  wrongful trading laws are relaxed until then, the prohibition on presenting winding up petitions where non payment is COVID-19 related remain in place, a relaxation of the entry criteria for businesses wishing to take advantage of the new moratorium continue to apply as well as exemptions for small suppliers to the ipso facto regime.
  • where a company has an eligible or occupational pension scheme the PPF and Pensions Regulator will now be entitled to certain notices and notifications if a company proposes a new moratorium or a restructuring plan; and
  • perhaps most notably the Act now carves out accelerated bank debt from the provisions on super priority.  A lender is not prohibited from accelerating its debt (given that entering into a new moratorium or proposing a restructuring plan is likely to be an event of default) but any debt that is accelerated is now specifically carved out from the super priority rules if a company enters into administration or liquidation within 12 weeks of the moratorium debt coming to an end.  This change also means that in a restructuring plan, accelerated debt can now be crammed down.  However the fact that a lender can accelerate (the Lords did not agree proposals to change this) means that a lender could potentially still thwart a moratorium.

We have updated our quick guides to the moratorium, the restructuring plan and ipso facto.  Our alert considering the impact of the moratorium on secured lenders and also what the changes to the wrongful trading laws mean in real terms for directors.  Each of the updated guides can be accessed by clicking on the links in this blog.

UK Insolvency Law Changes – impact of House of Lords amendments to the “new” moratorium on secured lenders

Houses of ParliamentThe Corporate Insolvency and Governance Bill (the “Bill”) was published on 20 May 2020 and introduced a new debtor-in-possession moratorium to give companies breathing space in order to try to rescue the company as a going concern. The Bill went through the House of Commons on 3 June and passed through the House of Lords on 23 June. The Bill was back before the House of Commons today and is likely to receive Royal Assent next week (at which point the Bill will become law).

Our last blog on the moratorium focused on the key provisions that secured lenders should be aware of and the impact on qualifying floating charge holders (“QFCH”). This blog will consider the changes made to the Bill as it has passed through Parliament and the impact of these changes on secured lenders.

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Further Measures to Protect UK Commercial Tenants

On Friday, 19 June 2020, the UK government announced that it would be extending existing measures to protect tenants from eviction over summer. In summary, the new measures include:

  • Extending the moratorium on forfeiture from 30 June 2020 to 30 September 2020
  • Preventing landlords from exercising Commercial Rent Arrears Recovery (“CRAR”) unless they are owed 189 days of rent
  • Banning the use of statutory demands and winding up petitions where a company cannot pays its debts due to COVID-19 until 30 September 2020
  • Introducing a new, voluntary Code of Practice (the “Code”) for commercial landlords and tenants

Our colleagues in real estate have produced this helpful alert that explains more.

Poland’s Simplified Restructuring Proceeding Takes Effect

As previewed in our prior post, Poland’s simplified restructuring proceeding (uproszczone postępowanie restrukturyzacyjne) is now in effect. The enabling legislation – with only minor changes from the description in our prior post affecting such restructurings – was finally adopted on 19 June 2020, signed into law on 23 June 2020 and took effect the same day. Debtors have until 30 June 2021 to retain a restructuring advisor and commence the new proceeding, which operates almost entirely out-of-court.

UPDATED: How to Access European and Middle Eastern Governments’ Financial Support Packages

Save your Sterling concept high quality and high resolution studio shootWe have updated our European & Middle Eastern Government Financial Support guide, which sets out what financial support businesses in different jurisdictions could access to help manage financial distress caused by Covid-19.  We have updated this with new details for:

  • France
  • Czech Republic
  • Italy
  • Slovakia

To access the updated guide – click here

 

Tracking the Changes to the UK Insolvency Laws: Where are We and What has Changed?

This week the House of Lords debated tabled amendments to the Corporate Insolvency and Governance Bill and the provisions will be examined by the Lords again next week.  There was plenty of debate about whether the proposed new processes protect the interests of third parties such as employees, banks and pension creditors but largely, the amendments being taken forward focus on the position of lenders and the potential consequences of bank debt being accelerated.  We will be posting a blog outlining any key changes to the legislation when the debates conclude, but in the meantime please click here to access our quick guides giving an overview of the proposed new moratorium, restructuring plan and ipso facto regime. 

 

UPDATED: How to Access European and Middle Eastern Governments’ Financial Support Packages

Save your Sterling concept high quality and high resolution studio shootWe have updated our European & Middle Eastern Government Financial Support guide, which sets out what financial support businesses in different jurisdictions could access to help manage financial distress caused by Covid-19.  We have updated this with new details for the Czech Republic, France, Italy, Germany, UK and EU.

To access the updated guide – click here.

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