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.

Nero CVA challenge – part one: The pre-emptive strike (out)

By Mark Prior on June 15, 2021 Posted in UK

CVA challenges have been in the spotlight recently and the story continues with Nero Holdings Ltd v Young in which the court considered an application to strike out a CVA challenge claim. Although there is nothing ground-breaking in the court’s reasoning to dismiss the strike out/summary judgment application, its detailed reasoning will offer some helpful guidance and assistance to those involved in these applications. It will also be helpful to know, following the hearing of the challenge application, how the Court tackles the position where a modification and/or material development occurs following the circulation of the CVA proposal, in particular where substantial votes have already been cast.

Impact for English Employers as UK Government Delays Easing of COVID-19 Restrictions in England

By Emily Davis on June 15, 2021 Posted in UK

Road Stop Sign Last night, the UK government confirmed what had been widely mooted in the press over the weekend – that there will be a four-week delay to the easing of COVID-19 restrictions in England and that 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.

Our employment colleagues have produced an alert covering what this means for English employers.

Pursuing An Insolvency Claim May Be Much More Expensive Following this Recent Decision (UK)

By Rachael Markham on June 10, 2021 Posted in UK

Symbol of law and justice in the empty courtroom, law and justice concept. The recent case of Manolete Partners Plc v Hayward and Barrett Holdings Ltd [2021] EWHC 1481 (Ch) impacts both insolvency practitioners and assignees of insolvency claims, potentially making such claims more expensive to bring and a procedural burden by requiring (depending on the nature of the pleaded claims) two sets of proceedings, even though the claims arise from the same facts.

Although the judge reached his conclusions “with regret” – and those conclusions essentially arise because of the constraints of the insolvency legislation – the findings are not helpful for insolvency practitioners seeking to pursue insolvency claims. More so for smaller value claims given the additional disbursement costs, and costs of two sets of proceedings, which could tip the cost/benefit scales against pursuing them.

Assignees of insolvency claims should also note the findings, although we have no doubt that litigation funders will do their best to find a workable solution to the problems that this case creates.

For those practitioners who are currently pursuing an insolvency claim using the procedure in the Insolvency Rules 1986 (the Rules), they should be alive to the fact that a respondent to those proceedings (or indeed the Court itself) may well seek an order requiring the applicant to pay an additional court fee to continue it, if part of the claim should have been issued using the Part 7 procedure (see further below) in order to remedy what this case has identified to be, a procedural defect.

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

By Rachael Markham on June 10, 2021 Posted in Cross Border

Distributed ledger technology Both Spain and Italy have introduced recent changes to their insolvency laws.

The changes are covered in our global guide and cover:

Spain

The obligation for a debtor to file for bankruptcy within two months of becoming insolvent is suspended until December 31 2021.
Updates to the Modification of the Creditor’s agreement measures.
Postponement of the duty to request the opening of the liquidation phase of the insolvency proceedings has been extended until December 31 2021.
Updates to the refinancing agreement measures.
The period of the expanded Employment Adjustment Subsidy will be extended.
Updates to the measure for financing and payments made by persons especially related to the debtor.

Italy

The deadlines of arrangements with creditors and restructuring agreements due in the period between February 23 2020 and December 31 2021, are extended by six months.
The new Insolvency Code has been postponed to September 1 2021.

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

By Rachael Markham on June 10, 2021 Posted in Cross Border

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

In brief, the updates include:

Updates to the Coronavirus Job Retention Scheme (CJRS), Statutory Sick Pay (SPP) and VAT deferral scheme.

United Arab Emirates

An extension to the TESS scheme

Germany

Updates on Bridging Aid available to small and medium-sized companies, and applications for extraordinary financial and hardship assistance applications
AID for Vaccine Glass Production

Czech Republic

Changes to applications for Programme COVID-2021

Italy

Updates on the SACE S.p.A. (the Italian Export Credit agency) being authorised to grant a public guarantee in favour of financial institutions (national or international) that provide loans to companies.
The Guarantee Fund for Small and Medium Enterprises measurers have been updated and are now available until December 2021.
Additional guarantee fund for portfolios of medium-long term financing to SMEs for research and development projects and investment programs are now available.
The Pool of Business Assets allocated exclusively to support the Italian productive system by Cassa Depositi e Prestiti (CDP) will be available soon.
A Fund for the support of shutdown economic activities has been ordered.
Increases to the endowment of the fund for the support of internationalization and the endowment of the revolving fund
Updates to the sanitation purpose and inventory tax credit
Updates to the Tax exemption from Local Municipal Tax (IMU) for tourism sector.
Update to the Financial support to large companies for 2021.

Is Greater Than Really Equal To? Sales of Over-Encumbered Property under Section 363(f)(3)

By Christopher Giaimo on May 26, 2021 Posted in US

Even prior to the COVID-19 pandemic, most retail bankruptcy cases involved at least some effort to maximize value by selling real estate holdings. The Bon Ton Stores, Forever 21, Sears, and Toys ‘R’ Us cases, among others, are perfect examples. These cases have, for the most part, achieved such sales under section 363(f) of the Bankruptcy Code with minimal resistance, typically on expedited time-frames. The lingering impact of the pandemic will likely continue to cause more distress to retail real estate owners who have seen dwindling revenues as a result of shut downs, capacity restrictions as well as government-mandated rent deferrals. Indeed retail real estate has been one of the hardest hit markets by the COVID pandemic. This unprecedented revenue depletion will undoubtedly pose new and significant challenges to debtors seeking approval of real property sales free and clear of liens under section 363(f); decreased revenues often correlate directly with decreases in collateral value, which often falls below that of the secured debt. Therefore, depending on a particular court’s interpretation of section 363(f), the ability to sell property free and clear may become more challenging.