Restructuring and insolvency roundup: What happened in May 2021?

Key updates

National Security and Investment Act becomes law

The National Security and Investment Act received royal assent on 29 April 2021. The Act introduces a mandatory pre-completion notification / clearance regime on third party purchasers in the UK where they acquire very specific, high risk entities and / or assets from any of the 17 specified (and sensitive) industry sectors, such as artificial intelligence. Whilst the obligation to obtain mandatory pre-completion clearance will always fall on the buyer, and whilst there is an express carve out for administrators (but not liquidators) contained in the Act, IPs should nonetheless consider whether a proposed transaction is caught by the Act and whether clearance is required.

The Insolvency Service publishes update on IVA protocol

The Insolvency Service published an update on the individual voluntary arrangement (IVA) protocol for 2021. The protocol provides an agreed standard framework for dealing with straightforward consumer IVAs and applies to both IVA providers and creditors. The old protocol will no longer be proposed to creditors after 1 August 2021.

Insolvency Service publishes guidance on independent scrutiny of the disposal of assets in administration

The Insolvency Service has published guidance on the requirements for independent scrutiny of the disposal of assets of a company in administration, including pre-pack sales. Specifically, the guidance refers to disposals made within the first eight weeks of administration to a party connected to the company (a connected person). The guidance refers to The Administration (Restrictions on Disposal etc to Connected Persons) Regulations 2021 (the regulations). See here for more information.

Notable cases

Establishing connected parties

Case: Darty Holdings SAS v Carton-Kelly [2021] EWHC 1018 (Ch)

Summary: The insolvent company, Comet Group Limited (Comet), had entered into a series of transactions to repay sums due to a company in its parent company’s group called Kesa International Limited (that later became Darty Holdings SAS). The liquidators, appointed eight months later, chose to challenge this repayment as a preference payment. The Chancery Division held that the payments had been made at a time when Darty was connected with the insolvent company. Comet was considered connected to Darty as Darty was an indirect subsidiary of Comet’s parent company. This meant that the two companies were ‘associates’ according to the definition in section 425 of the Insolvency Act 1986 and, therefore, were connected for the purposes of section 239.

EEA credit institutions recognition after Brexit

Case: Re Greensill Bank AG [2021] EWHC 966 (Ch)

Summary: The High Court granted an application by the insolvency administrator of Greensill Bank AG for recognition in the UK of German insolvency proceedings under the Cross-Border Insolvency Regulations 2006 (CBIR 2006). CBIR 2006 art 1(2)(h) still excludes EEA credit institutions by reference to the definition in Credit Institutions (Reorganisation and Winding Up) Regulations 2004. However, this definition is no longer present and EEA institutions are now not excluded from CBIR 2006.

Victories for tenants: New Look

A decision in relation to the New Look CVA had been awaited for some time, as certain of New Look’s landlords had challenged the CVA in October 2020. In common with many ‘retail CVAs’, the New Look CVA put properties and landlords into different groups, with some retaining existing rent arrangements, some having rent reduced, and others reset to turnover rents. See in depth summary here.

What we are reading…

David Williams, legal director in our restructuring and insolvency team, provided an insightful summary of key decision in relation to property related CVAs, rent arrears and restructuring plans. The cases covered include the New Look CVA, Commerz Real v TFS Stores, the Virgin Active Restructuring Plan and more. See the article here.

Stats focus

The Insolvency Service published its monthly company and individual insolvency statistics for April 2021.

Corporate insolvencies

In April 2021 there was a total of 925 registered company insolvencies, comprised of:

• 819 CVLs;
• 26 compulsory liquidations;
• 75 administrations;
• five CVAs; and
• no receivership appointments.

In April 2021, when compared with the number of company insolvencies registered in April 2020:

• compulsory liquidations were 74% lower;
• CVLs were 12% lower;
• there were 76% fewer CVAs; and
• administrations were 48% lower.

Individual insolvencies

• 1,425 debt relief orders;
• 812 bankruptcies; and
• there were, on average, 6,822 IVAs registered per month in the three-month period ending April 2021.

When compared with the number of company insolvencies registered in April 2020:

• debt relief orders were 4% lower;
• bankruptcies were 1% lower;
• debtor applications were 6% lower;
• creditor petitions were 121% higher; and
• IVAs registered per month in the three-month period ending April 2021 were 22% higher than for the three-month period ending April 2020.