Coronavirus - Government measures in key jurisdictions - Flipbook - Page 83
United Kingdom
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4
Insolvency
•
Has the
government made
any changes
to insolvency
legislation?
The UK Government has announced proposed changes to the UK insolvency laws in
order to address the unique circumstances arising from the Coronavirus pandemic.
The principal proposed changes were publicised on 28 March and include:
– a temporary suspension of the law making directors liable for wrongful trading. This
will apply retrospectively from 1 March 2020 for an initial 3 month period. This is for all
companies (not limited to those directly affected by coronavirus related issues). Other
related insolvency laws/legislation to remain effective, and
– the introduction of a new form of moratorium from creditors in addition to the current
administration provisions, this is likely to resemble some features of the US Chapter 11.
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
•
This change may help boards where the company is in financial difficulties and there
is significant uncertainty regarding the businesses’ financial future. In particular, it
might aid such companies considering whether to bridge their cashflow by borrowing
additional sums and accessing the furloughing scheme.
•
Insolvency update - changes to wrongful training
•
On 23 April 2020, the UK Government announced a new tranche of measures to
protect commercial tenants during the current crisis. The new measures, which will
be included in the Corporate Insolvency and Governance Bill will prevent the use of
statutory demands made between 1 March and 30 June 2020 and winding up petitions
presented to court between 27 April 2020 and 30 June 2020 where the tenant “cannot
pay its bills due to coronavirus”.
•
In addition to these changes, landlords will not be able to use the Commercial Rent
Arrears Recovery (CRAR) procedure as a means for recovering rent unless 90 days of
unpaid rent is outstanding.
•
There has been no meaningful Government intervention into the workings of UK
contracts between commercial entities and the normal rules apply.
•
In the UK there has been an increased focus on contractual small print, such as the
precise wording of force majeure clauses within contracts. The sort of unforeseen
disruption to lives and businesses that we are now seeing is exactly what one
imagines a force majeure clause is designed to respond to. In many cases the
pandemic or the restrictions the Government has now advised to limit its spread will
fall into a contractual definition of force majeure, however the clause itself will need to
be scrutinised carefully in order to determine whether or not it is engaged.
•
If a force majeure clause is engaged, typically it will suspend the performance of the
affected party’s obligations under the contract, for the duration of the force majeure event.
•
If performance of a contract may be significantly affected it is crucial to review the
terms of your contracts so you understand your rights and obligations and to allow
you to scenario-plan accordingly.
•
Contracts in the time of COVID-19: Force majeure and frustration
•
Particularly with long-standing contracting partners, many businesses are trying to
agree a mutually acceptable way forward, including varying contractual obligations
and sharing the exposure more fairly (in which case any variations should comply with
the formalities required by the original contract).
•
Public sector bodies are being strongly encouraged by the Government to provide financial
support to their at-risk suppliers to increase the financial resilience of their supply chains.
Government measures in key jurisdictions
83