Our guide sets out how different jurisdictions are changing their Insolvency Laws to help alleviate additional pressures placed on businesses as a consequence of cash flow pressures caused by COVID-19.
We have updated our guide to include further changes to insolvency laws in the UAE and Japan.
Click here to see our guide.
The Finance Act 2020 received Royal Assent today (22 July), confirming the anticipated but opposed intention to restore 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.
While HMRC’s claim is limited to claims for unpaid employer NIC, PAYE and VAT, those claims are often significant (particularly with additional COVID-19 support and deferrals), and despite calls from concerned parties to cap the claim by amount or time (or indeed scrap the proposal altogether) the Act does not do that.
We have updated our guide setting our the financial support measures available to companies with updates from Germany, Slovakia and Saudi Arabia. Click here to access the updated guide.
Our guide sets out how different jurisdictions are changing their Insolvency Laws to help alleviate additional pressures placed on businesses as a consequence of cash flow pressures caused by COVID-19.
We have updated our guide to include further changes to insolvency laws in the UK, UAE and Japan.
Click here to see our guide.
The Corporate Insolvency and Governance Act 2020 (the “Act”) came into force on 26th June 2020. Alongside the Act, a new Insolvency Practice Direction (“IPD”) came into force and provides additional information in respect of winding petitions and the “coronavirus test”. This blog will look at a few of the key changes contained in the IPD.
The temporary measures in relation to winding up petitions contained in the Act, essentially made a creditor’s ability to wind up a company more difficult (as outlined in our earlier blog). The procedural requirements in the IPD further reinforce this and create multiple filtering methods before a petition can proceed.
As the government slowly ‘unlocks’ the British economy, and activity adapts to the new normal alongside coronavirus, the hope must be that latent consumer demand triggers a rapid, equally dramatic, recovery in GDP and jobs, allowing businesses to boost cash-flow and repay debt. An economic recovery of this nature (the sharper the point of the ‘V’, the better) would allow the gradual withdrawal of governmental support (e.g. from 1 August 2020, employers will be asked to contribute towards the cost of furloughed employees’ wages under the Coronavirus Job Retention Scheme (CJRS), and the scheme is due to close entirely on 31 October 2020) without occasioning further disruption.
However, considering the magnitude of government intervention that has been required and the scale of the downturn in the underlying economy, the risk must be that without this critical support, businesses that are already distressed, and possibly now very highly leveraged, will be exposed to an economic climate in which they will struggle to maintain cash-flow at a level necessary to continue as a going concern. The more the ‘V’ of the recovery starts to look like a ‘U’ (or, even worse, an ‘L’), the greater the pressure. Unfortunately, early data suggest that the withdrawal of government support will indeed occasion additional distress and business failure.
Debt restructuring, and ultimately formal insolvency might be the only options for distressed companies but understandably, taxation isn’t necessarily at the forefront of business thinking at such times. However the tax implications (for borrowers, lenders and guarantors) arising from business restructuring proceedings should not be underestimated. Attempts to improve a company’s cash-flow position through debt restructuring can inadvertently trigger tax liabilities which, obviously, undermine the efficacy of such moves. The taxation of corporate debt in the UK is set out in the loan relationships regime. In broad terms, the tax will follow the accounting treatment. Please see our alert that summarises some of the key tax issues for debtor companies to keep in mind. Different, and (in certain circumstances more complex) rules apply to creditor and guarantor companies.
Following our webinar discussing the impact of the Corporate Insolvency and Governance Act 2020 for corporates, we have prepared a question and answer sheet addressing questions raised including:
To access the question and answer sheet, click here.
Different countries frame the exact description of the role of directors of a company in different terms. One feature is common to all – the obligation not to continue trading if a company is insolvent. Again, the detailed implications of doing so vary from one jurisdiction to another.
We have updated our consolidated guide to cover changes to the laws in England & Wales, Belgium, the Czech Republic and Italy.
To access the updated guide click here.
We have updated our guide setting our the financial support measures available to companies with updates from Germany, Slovakia and France. Click here to access the updated guide.
Our guide sets out how different jurisdictions are changing their Insolvency Laws to help alleviate additional pressures placed on businesses as a consequence of cash flow pressures caused by COVID-19.
We have updated our guide to include further changes to insolvency laws in Germany and Japan.
Click here to see our guide.
