LSCA Business
their claims and disclose any errors. There are strict time frames around this disclosure. 5) Rent arrears The rent moratorium has been pushed out to the end of December and landlords can’t evict tenants for non-payment of rent. Good news for tenants but will cause serious cash flow issues for landlords. 6) Statutory demands and winding up petitions Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus related debts. 7) Wrongful trading The suspension of wrongful trading which was in place until 30 September 2020 has NOT been extended so businesses need to aware of this and ensure they are taking appropriate advice. 8) The rise of the CVA CVAs work extremely well for businesses which have leasehold premises so we are seeing a plethora in the casual dining and retail sectors, usually moving to some form of turnover based rent where units are retained. CVAs can also work well for other types of business if there is an underlying viable business.
9) The Corporate Restructuring Plan This is a new tool introduced by the Corporate Insolvency and Governance Act 2020 (CIGA) and to date we are aware of only Virgin Atlantic doing this. It is a debtor in possession process and importantly it is not an insolvency process. It is an arrangement with creditors which is approved by the Court. The directors assisted by their advisors put a plan to creditors. Where creditors vote against the plan, they can be bound into the process by the Court (this is known as ‘cross class cramdown’) if it can be shown that that particular creditor class is no worse off as a result of the plan than in the alternative (i.e. an insolvency scenario). If this process can be made to be cost effective for SME businesses, which remains to be seen, it could be a very useful tool. Once the Court has approved the plan then it is implemented. As it is a Companies Act process not an insolvency process, it does not have the restriction that, for example, a CVA can bring in terms of tendering for contracts, particularly public sector ones, and the directors remain in control throughout. It can therefore be more attractive to a Board. It is not a particularly quick process (as two Court hearings are required) so there is a need for a Board to engage with advisors several months in advance. This is a process to be considered where the time is available and also
where there is unlikely to be any disputed creditor balances. Whilst we think this process can be used for companies very much smaller than Virgin (and indeed this is the where the government has aimed the legislation), it would not be appropriate for very small businesses. 10) Prepacks And finally, the government has announced that they intend to bring in regulation around prepacks to connected parties before June 2021. In summary, an administrator will be unable to dispose of company property to a person connected with the company within the first eight weeks of the administration without either the approval of creditors or an independent written opinion. The connected party purchaser will be required to obtain the written opinion. Where a report states that the case is not made for the disposal, an administrator can still proceed with the disposal but will be required to provide a statement setting out the reasons for doing so.
www.charteredone.co.uk
ISSUE 27 Winter2020
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