Updated: Guide To Financial Support Measures Across Europe And The Middle East

Our most recently updated guide includes updates for the UK, Italy, Germany and the Czech Republic notably:

UK

  • Updates to the Coronavirus Job Retention Scheme (CJRS)
  • Grants under the Self-Employment Income Support Scheme (SEISS) have been extended.
  • An increase to the Value Added Tax (VAT) for hospitality, holiday accommodation and attractions.
  • The full relief available under the Relief From Business Rates (Retail, hospitality and leisure sector) will now be available until 30 June 2021 with 66% available from 1 July 2021 until 31 March 2022.

Italy

  • Tax Credits for Medium Companies now available.

Germany

  • Further information about the Start-Up and Bridging Aids (Bridging Aid III).
  • The Agricultural Guarantees for Liquidity Protection Loans are no longer available.

Czech Republic

  • A new subsidy program for entrepreneurs performing film-related professions.

Please click here to see the updated guide.

Equitable Mootness Strikes Again: The Near Impossibility of Challenging a Debtor’s Critical Vendor Decisions

Gavel on bankruptcy Law books

Although debtors who file for Chapter 11 bankruptcy generally cannot pay prepetition debts until a plan which complies with the “absolute priority rule” is confirmed, there are a number of now well-established exceptions to this rule.  As noted (although not actually ruled upon) by the United States Supreme Court in its controversial “Jevic” decision, “[c]ourts, for example, have approved ‘first-day’ wage orders that allow payment of employees’ prepetition wages, ‘critical vendor’ orders that allow payment of essential suppliers’ prepetition invoices, and ‘roll-ups’ that allow lenders who continue financing the debtor to be paid first on their prepetition claim.”  Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 985 (2017).

With regard to so-called “critical vendor” orders, it has been common practice for more than two decades for debtors who commence chapter 11 bankruptcy cases immediately to seek authority to deem certain of their vendors as “critical,” thereby allowing such vendors to leapfrog their prepetition and otherwise second-to-last-in-line (only above equity) claims to the top of the feeding order, resulting in the lucky creditors potentially being at least partially, if not fully, paid in the very early stages of the proceeding.

Courts have adopted a fairly uniform, yet somewhat amorphous and circular test for what type of creditor can reasonably be deemed “critical”—it is one to whom payment is “critical to the debtor’s reorganization.”  In re Financial News Network Inc., 134 B.R. 732, 736 (Bankr. S.D.N.Y. 1991).  In practice, courts routinely leave the determination as to which vendors are “critical” to “the sound business judgment of the debtor.”  In re United Am., Inc., 327 B.R. 776, 782 (Bankr. E.D. Va. 2005).  This wide grant of discretion, however, often leads to disgruntled creditors who have not been designated as “critical” and other parties in interest—including creditors’ committees—questioning whether the debtor’s decisions in this regard are truly objective, made at arm’s length and otherwise justified.  However, as evidenced by the Second Circuit Court of Appeals’ recent decision in GLM DFW, Inc. v. Windstream Holdings, Inc. (In re Windstream Holdings, Inc.), 2021 U.S. App. LEXIS 4630 (Feb. 18, 2021), it is nearly impossible to obtain redress in this regard, given both the wide discretion provided to debtors and other nearly impenetrable roadblocks, such as the doctrine of equitable mootness.

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CVAs – a quick guide for UK landlords and other creditors when faced with a CVA proposal

There has been a significant increase in the use of CVAs, in particular in the retail and hospitality sector over the last 12 to 24 months, largely impacting landlord creditors.

A CVA proposal can often run to hundreds of pages, and understanding what it means, how it impacts creditors and whether the terms offer a fair outcome can be difficult.   Should a creditor vote in favour (or not)? Are there grounds for challenge?  Our quick guide helps identify areas to consider when contemplating the answer to those questions.

While primarily considering the position of landlord creditors, the guide sets out points which are helpful to all creditors and also corporates who might be considering a CVA and how best to structure that to avoid challenge.

UK court provides further clarity on the ‘coronavirus test’ for winding up petitions

The case of Newman v Templar Corp Ltd [2020] EWHC 3740 (Ch) came before the courts in December 2020 and provides a helpful example as to when a winding up petition can overcome the ‘coronavirus test’ set out in Schedule 10 of the Corporate Insolvency and Governance Act 2020 (“CIGA”).  The judge also concluded that the low threshold test in Re A Company (2020) EHC 1551 should be taken as the settled approach to these type of cases.

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UK Government announces that restrictions on forfeiture will be extended

Shoppers walking down the high streetIt is perhaps not unsurprising that the prohibition on landlords taking forfeiture action will be extended until 30 June 2021 given that the UK government has extended other support measures for UK businesses (such as the furlough scheme) and is keen to avoid the cliff edge of insolvencies that many fear could happen should support come to an end abruptly.

In the government’s announcement it says that its “current position is to support commercial landlords and tenants to agree their own arrangements for paying or writing off rent debts by 30 June.”  But goes on to say:  “if these discussions do not happen and there remains a significant risk to jobs, the government is also prepared to take further steps.”

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Do the draft UK Pre-Pack Regulations address industry concerns?

question mark on a sticky note against grained woodOn 24 February 2021, the UK government published the draft bill for the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 (the “Regulations”), which, once in force, will require mandatory creditor approval or an evaluator report before an insolvency practitioner (“IP”) can dispose of the company’s property by a ‘pre-pack’.

The Regulations are expected to come into effect on 30 April 2021 and we do not expect the detail in the Regulations to change significantly – but do the Regulations address concerns that stakeholders and others have expressed? To a degree, but not as far as some had hoped.

This blog sets out what an IP will need to do before a pre-pack sale can be concluded and the extent to which the Regulations have addressed concerns. Continue Reading

UK Spring Budget 2021 – The Long Road to Recovery: Taxation

The UK Spring Budget Statement delivered by Chancellor of the Exchequer, Rishi Sunak, on Wednesday 3 March 2021, laid bare the scale of the economic damage done by COVID-19. The Chancellor’s focus was on initiating an investment-led recovery, to incentivise investment, productivity and growth and to build a new, innovative and “green”, UK economy. In terms of tax policy, the Budget couples some (but actually surprisingly few) tax rises with several innovative tax incentive measures. This alert outlines some of the more significant new announcements and considers what might come next.

UPDATED Global Insolvency Report: Impact of Covid-19 on Insolvency Laws

The most notable changes to our updated guide this week are those impacting Japan where:

  • There has been no further extension to the subsidy program for businesses facing severe conditions
  • There has been no further extension to the national rent subsidy program; but
  • The period of the expanded Employment Adjustment Subsidy will be extended; and
  • The regional/city based rent subsidies scheme will also be extended with the application period being extended until April 30 2021.

All other jurisdictions remain largely the same.

Please click here to see our updated guide.

Updated: Guide To Financial Support Measures Across Europe And The Middle East

Our most recently updated guide includes updates for the UK, EU, France, Germany and the Czech Republic notably:

UK

  • Updates to the Coronavirus Job Retention Scheme (CJRS)
  • Claims for certain grants under the Self-Employment Income Support Scheme (SEISS) have now closed but there has been an update regarding when details for the next grant will be announced.
  • An update to the Value Added Tax (VAT) Deferral New Payment Scheme.

EU

  • The final version of Regulation (EU) 2021/241, the Recovery and Resilience Facility Regulation has been endorsed and has now entered into force.
  • Purchases made under the Pandemic Emergency Purchase Programme (PEPP) can no longer be conducted (such purchases could only be made until the end of 2020).

France

  • New deadlines have been set in relation to the state guarantee for funding operations by way of assignment of receivables.

Germany

  • Updates on Bridging Aid available to small and medium-sized companies.

Czech Republic

  • A new subsidy program for entrepreneurs operating ski resorts has been introduced.

Please click here to see the updated guide.

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