Insolvency Bitesize

In this first ‘new look’ Insolvency Bitesize, we reflect on what some of the key legal and market themes might be in the year ahead.

  • Increasing pressure on directors: the roll-off of Covid-19 related government schemes and reliefs; the fall-out from Carillion and other large corporate failures; the expected decision by the Supreme Court in Sequana on directors’ duties; and HMRC’s increased powers to pursue corporate tax claims – director behaviour influences how situations unfold and these are all set to have an impact;
  • Issues for distressed M&A: possible case law on market standard intercreditor distressed disposal provisions; connected party insolvency sale regulations by the summer; and the National Security and Investment Bill by the autumn – distressed M&A transactions could take longer, be more costly to complete and risk facing increased scrutiny. We take a look at the Bill in this edition;
  • Further developments in CVAs, schemes and restructuring plans: post Brexit issues on jurisdiction and recognition; creditor challenges to restructuring proposals; further use of the cross-class cram down mechanism; and questions on whether the restructuring plan might be a viable alternative to a CVA in the right circumstances – the uses of new and repurposed restructuring tools will continue to evolve, such innovation being the hallmark of the UK restructuring and insolvency market over the last decade;
  • Increasing role of Government and regulators in restructurings: restructurings involving government-backed debt; HMRC as secondary preferential creditor; and stakeholders getting to grips with the broad powers of the Pensions Regulator under the Pension Schemes Act – dealing with Government and regulators will add additional complexity to restructuring and insolvency transactions; and
  • Growth in insolvencies and disputes: temporary restrictions on creditor winding-up petitions coming to an end; landlords regaining use of powerful rent recovery tools; and many businesses struggling with the financial effects of Covid-19 – it seems almost inevitable that there will be an uptick in insolvency filings eventually, and with that there will be an increasing number of insolvency-related disputes.

Against that backdrop, this edition focusses on a broad range of recent insolvency developments. We kick-off with a piece featuring the National Security and Investment Bill and show how it might affect insolvency sale transactions. We cover recent decisions on the extent of an administrator’s duty of care to bidders, the impact a deed of priority had on the enforceability of a floating charge for the purposes of Paragraph 16 of Schedule B1 and highlight the court’s continued development of its approach to dealing with procedural failures when appointing administrators out-of-court. We take a broad overview of insolvency developments in the financial services sector and then conclude this edition by highlighting how even post Brexit, COMI will remain a key part of the UK insolvency lexicon.

We hope you find this edition useful. As ever, please get in touch with any questions you may have.

Topics covered in this report

1

National Security and Investment Bill: distressed M&A

The National Security and Investment Bill introduces a far-reaching and standalone national security screening regime. It puts in place a mandatory notification obligation for acquisitions of control through the holding of particular thresholds of shares or voting rights in entities in the most sensitive sectors of the economy. It also specifies a voluntary regime for a range of other transactions where control is acquired at an asset level. The hybrid notification regime is accompanied by an expansive “call-in” power to enable the Government to review non-notified transactions up to five years post-completion and the power to impose serious sanctions for non-compliance. The Bill represents a radical upgrade of the UK foreign investment regime.

Download your copy of the report:




DOWNLOAD >

PDF download

x Covid-19 Resource Hub