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

Our most recently updated guide includes updates for the UK, France, Italy, Germany, Czech Republic and Slovakia.

In brief, the updates include:

UK

  • Updates to the Coronavirus Job Retention Scheme (CJRS) including that claims for furlough days in August 2021 must be made by 14 September 2021.
  • Updates to temporary extension to carry back of trading losses outlining the de minimis aspect which must be considered when applying.
  • Updates to the Temporary reduced rate of VAT for hospitality, holiday accommodation and attractions relating to application considerations.
  • Updates to the Business Rates Relief Fund including confirmation that it will be available once the MCC legislation has passed and local authorities have set up local relief schemes.

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Resetting the UK Landlord and Tenant Relationship Post-COVID-19 Webinar

Empty street in Marylebone district, London, EnglandOn 29 September 2021, our panel of experts will consider the position of UK landlords and tenants post-pandemic. Our speakers will explore strategies for rent recovery and rent payment from both the landlord’s and tenant’s view, the question of arbitration versus negotiation, the impact of re-negotiating and re-gearing leases on covenant strength and values, and the formal restructuring options available, including how tenants can use them and how they affect landlords. We will also consider the wider context of directors’ duties for both landlords and tenants, and aim to provide some ideas to help manage the landlord and tenant relationship moving forward.

Chaired by head of UK Restructuring & Insolvency John Alderton, we will hear from:

  • Michelle Adams, Partner, Litigation, Squire Patton Boggs
  • Jonny Lees, Director, Teneo
  • Prew Lumley, Partner, Real Estate, Squire Patton Boggs
  • Russ Hill, Partner, Restructuring & Involvency, Squire Patton Boggs
  • Tim Simmons, Partner, Sanderson Weatherall

Please click here to register for this event.

UK Court Sanctions First “Mid-tier” Company Restructuring Plan

Opening the door for the SME market, Sir Alistair Norris has sanctioned the first ever restructuring plan for a “mid-market” company.  The plan sanctioned in Amicus Finance PLC (in administration) is also the first restructuring plan proposed by insolvency practitioners and the first to cram down a secured creditor.

The sanction judgment is short, but the adjourned convening hearing that was dealt with by Mr Justice Snowden (the first hearing was before Mr Justice Trowers) gives some insight into the plan.

There were, so it seems from the convening judgment, a few bumps in the road, but with a helpful steer from the court the bumps were flattened, creditors meetings were ordered and the restructuring plan sanctioned.

From a practical point of view, here are the key takeaways:

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(UK) Winding Up Petitions – The Hurdle of the Coronavirus Test

The recent case of Re A Company [2021] EWHC 2289 (Ch) outlines how the coronavirus test for winding up petitions will be applied by the Courts. Taking a similar approach, to the cases of Newman v Templar Corp Ltd [2020] EWHC 3740 (Ch) and Re PGH Investments Ltd v Ewing [2021] EWHC 533 (Ch), both as detailed in our blogs here and here, the low threshold test for determining whether coronavirus had an impact on the financial position of the Company was applied.

The coronavirus test prohibits a creditor from pursuing winding up proceedings against a debtor company that has been financially effected as a consequence of the coronavirus pandemic.  The temporary changes to winding up petitions are set to end on 30 September 2021 (and therefore the helpfulness of this case is perhaps limited).  However if, as hinted at by the UK government, these measures are extended to prohibit recovery of COVID rent arrears, it is worth noting how the debtor and court approached the question of whether coronavirus has had a ‘financial effect’ on the company.

Financial Effect

It is not a requirement that the pandemic must be shown to be the (or even a) cause of the company’s insolvency.

In this case the debtor company’s evidence addressed the fact that the company had experienced difficulties with workers self- isolating, which had delayed completion of projects, and therefore cash flow.  The Judge commented that that alone would have sufficed to show that coronavirus had had a financial effect on the debtor company.

From a debtor company’s perspective, demonstrating that coronavirus has had a financial effect on the company is unlikely to be difficult to evidence, particularly where the business has been affected by the availability of workers.  That said, the petitioner did criticise the debtor’s evidence in this case, and similar criticisms have been raised in previously reported cases.

Although the judge commented that more particularised evidence could have been given by the debtor company about the company’s reduced turnover, she did take into account that the debtor company’s experience was supported in evidence by independent articles that mirrored ‘what was being reported in articles concerning the construction industry generally.’

If a debtor company is able to demonstrate that coronavirus had had a financial effect on the company, the onus then falls on the petitioning creditor to evidence that a debtor company would have been unable to pay the debt in any event.

In this case, the petitioning creditor was not able to overcome the second limb of the test because more evidence was required to demonstrate that the company was insolvent within the meaning of s123 Insolvency Act 1986.

Although the bar is low to establish that coronavirus has had a financial effect, bare assertions will not suffice to show that a debtor company would still not have been able to pay. This is a difficult evidential point for a petitioner who cannot give direct evidence on the finances of the debtor.

Congress Proposes Significant Bankruptcy Code Changes to Protect Tort Claimants and Creditors

Two controversial mechanisms are available in many circuits to assist parties in a chapter 11 case to reach a global resolution and obtain plan confirmation:  non-consensual third-party releases and preliminary stays against third-party litigation.  On July 28, 2021, the House Committee on the Judiciary Subcommittee on Antitrust, Commercial and Administrative Law announced proposed legislation, the Nondebtor Release Prohibition Act of 2021 (“NRPA”), which would largely prohibit the use of nonconsensual third-party releases.  Testimony given before the House Committee discussed how plans of reorganization proposed in Purdue Pharma, USA Gymnastics, Boy Scouts of America, and various Christian diocese bankruptcy cases contain such releases and how these releases could negatively impact tort claimants who are victims of egregious acts.

The NRPA would: (i) prohibit chapter 11 plans from containing nonconsensual third-party releases; (ii) limit the duration of injunctions precluding the initiation or continuation of lawsuits against non-debtors to 90 days after the petition date; and (iii) permit the dismissal of a case commenced by a debtor that was formed through a divisional merger (i.e., separation of a company’s liabilities and assets) within 10 years of the petition date.  Although the intent of the NRPA to protect tort claimants is understandable, some may be concerned that the means by which the NRPA seeks to effectuate this end may diminish the equitable powers that have in many cases seemed to serve bankruptcy courts, debtors, and their stakeholders well in many complex and difficult cases. Continue Reading

A Return from the Edge? A New Policy Statement from the UK Government on Commercial Rent Debts

For some time, the government has been considering how best to manage the billions of estimated rent arrears in order to avoid a flurry of winding-up petitions and evictions. This requires a careful balance to protect both landlords and businesses in need, which proposed legislation to ringfence certain rent debt seeks to do. In their latest policy statement, the government has outlined the new process they are looking to legislate. Continue Reading

Company Voluntary Arrangements (CVAs) from a UK retailer’s perspective

CVAs are a useful tool in the restructuring tool kit, and may prove extremely helpful to retailers or hospitality companies as a means of supporting those businesses as they emerge from the pandemic.   However, with landlords often being the primary creditor who’s claims are compromised under the CVA proposal, this has also led to an increase in CVA challenges – most recently those challenging the New Look and Regis CVAs.

In our last alert in the series, we consider the impact of those cases on the shape and usefulness of a CVA from the point of view of those companies operating in retail and hospitality.

To Estimate or Not to Estimate, that is the Question

Is there any downside to a debtor filing a motion to estimate a claim?  Or, is an estimation motion simply procedural in nature?  As the debtors recently discovered in In re SC SJ Holdings LLC, a motion to estimate a claim before a bankruptcy court may not always lead to a significantly reduced claim, and may impact plan confirmation.

The Facts

The Debtors in SC SJ Holdings, LLC operate an 805-room luxury convention/group-style hotel located in San Jose, California that was formerly known as the San Jose Fairmont.  The hotel was previously managed by Accor Management US (“Accor”) pursuant to a hotel management agreement (the “HMA”).  As part of its out of court restructuring efforts, the Debtors sought to terminate the HMA, which termination was opposed by Accor. Continue Reading

Settling Tax Debts: How Much Support Will HMRC Provide To Your UK business?

Following the UK business secretary offering assurance that HMRC will take a ‘cautious approach’ to recovering tax debts (see our previous blog), HMRC has now published guidance outlining its approach.

This guidance also explains how HMRC might respond where a business has taken advantage of one of the government backed lending schemes (such as a bounce back loan or CBIL) as well as outlining its approach to company voluntary arrangements.

Can a UK business therefore expect HMRC’s support? The answer to that depends.  Is there a viable business with temporary cash-flow problems?  Or does the business have a limited chance of recovery?    We have prepared this alert that looks in more detail at what a business can expect in the coming months from HMRC, setting out key considerations for UK businesses and insight into when a business is likely to secure support from HMRC.

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