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Does a lender’s demand for the appointment of a Chief Restructuring Officer (or CRO) by its borrower constitute “undue duress” for purposes of invalidating a personal guarantee? That question was before the Fifth Circuit in Lockwood International, Inc. v. Wells Fargo, National Association et al. v. Michael F. Lockwood, Case 20-40324 (5th Cir. 2021). The personal guarantee at issue was granted by the sole owner of certain entities (the “Borrowers”) that were parties to a $90 million secured revolving loan agreement with certain lenders (the “Lenders”). Not long after entering into the agreement, the Borrowers found themselves in default under a number of financial covenants. In order to address the defaults, the parties entered into an amendment which, among other things, reduced the commitment to $72 million. In connection with amendment, the Borrowers’ owner (the “Guarantor”) executed a guarantee of all obligations of the Borrowers in favor of the Lenders (the “Guarantee”). As common practice for a borrower in distress, the Borrowers also retained a CRO at the recommendation, or insistence, of the Lenders.

Following the amendment, the Borrowers were again in default. At this time, the Lenders demanded that the CRO be granted full authority over the businesses. If not, the Lenders purportedly threatened to accelerate the loans and exercise their remedies against the collateral as permitted under the loan agreement. The Guarantor and the Borrowers relented and granted the CRO control of the company’s operations. Notwithstanding the escalation of the CRO’s role, defaults persisted and the parties ultimately executed a number of forbearance agreements. As typical of such agreements, the Guarantor acknowledged the validly of his obligations and that he had no defense to enforcement, effectively ratifying the Guarantee. The Guarantor further granted a full release and waiver of claims in favor of the Lenders. Following expiration of the second forbearance, the Lenders accelerated the loans.

After much litigation between the parties and a bankruptcy filing by the Borrowers, a final claim remained – the Lenders’ breach of guarantee claim against the Guarantor. On that point, the District Court granted the Lenders’ motion for summary judgment. It considered, and rejected, the Guarantor’s affirmative defenses — fraudulent inducement, duress, unclean hands, and equitable estoppel – and ordered the Guarantor to pay more than $58 million. The Guarantor appealed to the Fifth Circuit with a focus on his claims of duress, particularly as it related to the threats of acceleration to compel the appointment of a CRO with full authority.

The Fifth Circuit explained that, in order to prevail, the Guarantor must show that the Guarantee, and each forbearance agreement, was voidable and that “the lenders obtained his signature by fraudulent means or by taking advantage of his dire financial straits.” Id. at p. 5. The Guarantor argued that “economic duress” compelled him to enter into each of the agreements. With respect to the first forbearance agreement, he argued that the Lenders threatened acceleration which would prove ruinous for the Borrowers. The Court explained, “[n]o doubt [the Guarantor] feared the looming prospect of the banks’ demanding the tens of millions of dollars that he and his companies owed. The banks used that leverage to seek something they wanted: a transfer of authority to the CRO. But using leverage is what negotiation is all about. And difficult economic circumstances do not alone give rise to duress.” Id. at p. 7. (citation omitted). Under applicable law, duress requires: “(1) a threat to do something a party has no legal right to do, (2) an illegal exaction or some fraud or deception, and (3) an imminent restraint that destroys the victim’s free agency and leaves him without a present means of protection.” Id. (citation omitted).

The decision should provide further comfort to lenders that the exercise of their leverage to extract value in face of defaults (in this case, the appointment of a CRO with full authority), should not raise to the level of undue duress needed to void otherwise valid and enforceable obligations.

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The Delaware Bankruptcy Court (“Bankruptcy Court”) recently issued a ruling that provides additional clarity regarding the treatment of “appraisal rights” in bankruptcy proceedings and the scope of section 510(b) of the Bankruptcy Code.  In In re RTI Holding Company, LLC, et al., (decided August 4, 2021) the Bankruptcy Court subordinated the general unsecured claims filed by holders of “appraisal rights” in respect of the debtors’ equity (the “Claimants”).  In general, “appraisal rights” entitle shareholders of a target company to demand that the purchase price of their shares be determined by a court after an independent valuation.  A successful exercise of such rights would require the purchaser to acquire the shares of perfecting shareholders at an enhanced price (or later fund the difference if the merger had been completed).

The debtors were a number of entities related to the Ruby Tuesday restaurant chain, including Ruby Tuesday, Inc. (“RTI”). In late 2017 the company proposed a “going private” transaction pursuant to which RTI would be merged with a subsidiary. The transaction priced RTI’s stock at $2.40 per share. The Claimants purchased shares of RTI with the expectation that they would be acquired in the merger. Following their purchase of the shares, and in accordance with Georgia law, the Claimants rejected the offer and demanded payment in excess of $5.00 per share, validly perfecting their appraisal rights. In April 2018, RTI commenced an appraisal action, seeking a determination that the fair value of shares was less than or equal to the proposed purchase price (the “Appraisal Action”). The merger was later consummated while the Appraisal Action remained pending. In October 2020, RTI and the other debtors commenced their bankruptcy cases and further activity in the Appraisal Action was stayed.

The Claimants filed general unsecured claims in the bankruptcy cases. The debtors filed a plan of reorganization which subordinated the Claimants’ claims to those of other unsecured creditors (and provided for no distribution on account thereof).  Section 510(b) of the Bankruptcy Code provides that “… a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security… shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock”  (emphasis added).  The language of section 510(b) is ambiguous, leaving courts to interpret the required nexus between the ownership of the security and the nature of the related claim.  See Baroda Hill Inv. V. Telegroup, Inc., 281 F.3d 133 (3d Cir. 2002).

After reviewing the limited case law, the Bankruptcy Court applied a “but for” test.  Would the claims exist but for the Claimants’ prior ownership of the shares? The court determined that they would not – the claims arose under a Georgia law that is available only to shareholders, and would not exist but for the ownership of the stock. But the court went further. It explained that subordination of a claim must also serve the purpose of Section 510(b) of the Bankruptcy Code. This section is intended to prevent shareholders from achieving recovery as creditors, eliminating the risk inherent in equities. In its consideration, the court focused on the Claimants’ acquisition of the shares following the announcement of the pending merger. The court believed that this timing exhibited their intent to assume the risks of an equity holder, and not those of a creditor.  The court determined that, if it rejected subordination, it would effectively be ruling that the Claimants’ assertions of value were correct, eliminating the risk that the court would have ruled in favor of RTI.  Such a result, the court explained, would be contrary to the intent of section 510(b).

The ruling in RTI Holding Company provides guidance to market participants regarding the scope of section 510(b), particularly in the context of appraisal rights. Subordination of a claim under this section is appropriate (i) if the claim would not have arisen “but for” the ownership of securities and (ii) such subordination furthers the policies of section 510(b). Both prongs leave room for interpretation.  In the instant case, for example, had the Appraisal Action concluded prior to the bankruptcy, resulting in a judgment in favor of the Claimants, the Bankruptcy Court may have come to a different conclusion. In addition, Bankruptcy Court may also have come to a different conclusion had the Claimants held the shares prior to the announcement of the merger. Market participants will have to continue to navigate murky waters awaiting the next challenge to the subordination of claims relating to appraisal rights.

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By Cathryn Williams, Paul Muscutt and Beth Bradley of the London Crowell Restructuring Team.

The Insolvency Act 1986 (HMRC Debts: Priority on Insolvency) Regulations 2020 (SI 2929/983) (the Regulations) were made on 11 September 2020 and will come into force on 1 December 2020.

As a result of the changes brought about by the Regulations, when distributing the assets of a company that enters an insolvency process on or after 1 December 2020, HMRC’s claim for unpaid taxes collected by companies on behalf of HMRC, including:

  • PAYE Income Tax;
  • Construction Industry Scheme Deductions;
  • Employee National Insurance contributions;
  • student loan repayments; and
  • VAT,

will move up the hierarchy to rank ahead of floating charge holders in the payment waterfall. Note that the return of Crown Preference is not a return to pre-2002 when all tax debts enjoyed preferential status; taxes due by corporates themselves (including corporation tax and capital gains tax) will remain as ordinary unsecured debts and will, therefore, continue to rank behind the claims of floating charge holders.

As HMRC will be a secondary preferential creditor, in most cases it is likely there will be less realisations available in an administration or liquidation for distribution to floating charge holders. The change will also likely result in less realisations being available for distribution to unsecured creditors via the prescribed part.

The Regulations follow previous legislative changes that have already diminished the position of floating charge holders. In April 2020, realisations from floating charge assets available to a floating charge holder were reduced following the increase in the prescribed part from £600,000 to £800,000. Further, following the introduction of the Corporate Insolvency and Governance Act 2020 in June this year, floating charge holders are prevented from appointing an administrator and/or imposing restrictions on the disposal of floating charge assets whilst a company is in moratorium and there are further implications on floating charge realisations if insolvency proceedings start within 12 weeks of the end of the moratorium (for further information on the moratorium, see our previous post here

The Regulations add to the uncertainty of recovery faced by floating charge holders and unsecured creditors in insolvency situations. These changes may further impact upon the economy as a whole, if the appetite of lenders to make available facilities (particularly asset based lenders, where floating charge security forms an important part of their security package) is diminished as a result. The changes may well result in the reduction or withdrawal of funding. For more information on what lenders can do to protect their position in light of the changes see our client alert

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By Cathryn Williams, Paul Muscutt, Andrew Knight and Beth Bradley


Following our recent post ( on the new Corporate Insolvency and Governance Act 2020 (“the Act”), we now take a closer look at the moratorium and the effects on priority between pre-existing and moratorium lenders.

The New Moratorium – an Overview

The moratorium is intended to give companies breathing space by preventing creditors from taking enforcement action for an initial period of 20 business days. The process is led by a company’s directors and is overseen by an insolvency practitioner in the role of “monitor” who is an insolvency practitioner and an officer of the court.


(1) the company must be incorporated under the Companies Act 2006 or otherwise capable of being wound up under the Insolvency Act 1986;

(2) the directors consider the company is, or is likely to become, unable to pay its debts;

(3) the monitor considers the moratorium would result in the rescue of the company as a going concern;

(4) the company must not have been subject to insolvency proceedings or have been in a moratorium, CVA or administration within the past 12 months.

Certain companies are specifically excluded from using the moratorium, including banks, insurance companies and parties to capital market arrangements.

There are two routes into a moratorium:

  1. In-court process: directors may apply to the court where either there is an outstanding winding up petition or the company is an overseas company (note that until 30 September 2020 the directors can use the out-of-court process below even if there is an outstanding winding up petition, although this temporary exemption does not apply to overseas companies). The moratorium commences when the court order is made.
  2. Out-of-court process: directors file the relevant documents in court including the monitors’ certification. The moratorium commences when the documents are filed with the court.

Duration of moratorium?

The moratorium initially lasts for 20 business days (the “initial period”). However, provided certain conditions are met, the initial period may be extended:

  1. by the directors, without the consent of creditors, for a further 20 business days after the end of the initial period (note that the extension must be applied for before the initial period ends);
  2. by the directors, with creditor consent, for a maximum period of 364 days, including the initial period. Extension with creditor consent may occur more than once;
  3. by the court, on application by the directors, for which there is no maximum period and which may occur more than once.

Effects of moratorium:

The moratorium allows the directors to retain control of the company, which cannot be placed into an insolvency procedure except at their instigation.

Other aspects of the moratorium broadly follow the administration moratorium: landlords cannot forfeit without court permission; security cannot be enforced without court permission (other than certain types of financial collateral); no steps may be taken to repossess goods in the company’s possession under hire-purchase agreements without court permission; and legal processes against the company cannot be commenced or continue without court permission (except certain employment claims).

Significantly, floating charge holders cannot give notice to crystallise their floating charge or otherwise restrict the disposal of floating charge assets during the moratorium. If a floating charge holder’s ability to crystallise their charge is time-limited and expires during the moratorium, this time is extended to as soon as reasonably practicable after the end of the moratorium or (if later) the day on which the floating charge holder is notified of the end of the moratorium.

The Act provides that new security granted during the moratorium can only be enforced if the grant of that security was agreed to by the monitor, but this is in any event subject to the rule, mentioned above, that security (other than certain types of financial collateral) cannot be enforced during the moratorium without court permission.

The Act imposes certain restrictions on a company during the moratorium:

  • Obtaining credit: the company must inform a potential provider of credit of more than £500 that the moratorium is in force; the company and the directors commit an offence if they fail to do so.
  • Granting security: new security can only be granted or created with the monitor’s consent, which should be given only if the monitor thinks it will support the rescue of the company.
  • Entering into market contracts: the company may not enter into market contracts, financial collateral arrangements and certain other market arrangements. The company and the directors commit a criminal offence if they do so.
  • Payment of certain pre-moratorium debts: the company may not pay pre-moratorium debts that are subject to a payment holiday (see further below) which (in total) exceed the greater of £5,000 or 1% of the company’s total unsecured debts at the start of the moratorium, unless one of the following applies:
    • the monitor consents;
    • payment is pursuant to a court order or required in relation to a court-sanctioned disposal of hire-purchase or charged property.
  • Disposal of property: the company may dispose of its property if one of the following applies:
    • the monitor consents;
    • the disposal is made in the ordinary course of business;
    • the disposal is pursuant to a court order.

Termination of the moratorium:

The monitor can terminate the moratorium by filing a notice at court and they must do so if they are of the opinion that:

  1. the moratorium is no longer likely to result in the rescue of the company as a going concern;
  2. the objective of rescuing the company as a going concern has been achieved;
  3. the monitor cannot carry out his or her functions because the directors have not provided the monitor with necessary information;
  4. the company is unable to pay moratorium debts that have fallen due or pre-moratorium debts without a payment holiday (see further below). As most pre-existing lending will fall within the definition of moratorium debts or pre-moratorium debts without a payment holiday, incumbent lenders may have an element of control over the process; if the moratorium constitutes an event of default that automatically accelerates or permits the lender to opt to accelerate the entire debt, then the monitor may have to bring the moratorium to an end if the company is not in a position immediately to pay such debts. This is likely given that, in order to enter the moratorium, the directors have confirmed that the company is, or is likely to become unable to, pay its debts.

The moratorium will also terminate automatically if:

  1. the company enters into an insolvency process;
  2. a restructuring plan or scheme of arrangement is sanctioned;
  3. c court order to that effect is made;
  4. the term of the moratorium expires.

Categories of Debt:

The Act divides the company’s debts into the following three categories:

  1. Pre-moratorium debt with a payment holiday

With important exceptions (see below), companies in moratorium benefit from a “payment holiday” under the moratorium provisions for debts that existed before the moratorium or, if the debt did not itself exist, the obligation under which the company becomes liable to pay that debt existed before the moratorium.

  1. Pre-moratorium debt without payment holiday

(a)        Relevant debts

Certain pre-moratorium debts that are not subject to a payment holiday and must continue to be paid during the moratorium. These are debts that fell due before, or fall due during, the moratorium and relate to:

  • the monitor’s remuneration or expenses;
  • goods or services supplied during the moratorium;
  • rent in respect of a period during the moratorium;
  • wages or salary arising under a contract of employment, insofar as they relate to a period of employment before or during the moratorium;
  • redundancy payments;
  • debts or other liabilities arising under a contract or other instrument involving financial services. Importantly, this includes a loan agreement, with the consequence that, unless otherwise agreed, capital and interest payments due to lenders are still payable during the moratorium and a failure to make such payments may force the monitor to terminate the moratorium (see further below).

(b)       Priority pre-moratorium debt

Priority pre-moratorium debt includes all pre-moratorium debt without a payment holiday (i.e. everything listed in (a) above) but excludes “relevant accelerated debt”. Relevant accelerated debt is any pre-moratorium debt that falls due: (1) between the date on which the monitor’s statement (that the moratorium is likely to result in the rescue of the company) is made and the last day of the moratorium and (2) as a result of the operation or exercise of an acceleration or early termination clause.

The exclusion of “relevant accelerated debt” from the category of debts having super priority in a subsequent insolvency was a late amendment to the Bill as it made its way through Parliament.   It was introduced to address concerns that financial creditors could accelerate pre-moratorium debt without a payment holiday during the moratorium, cause the moratorium to fail and by so doing obtain super-priority status for the full amount owed to them.

  1. Moratorium debt

Moratorium debt includes any new debt that arises during the moratorium (other than by reason of an obligation incurred before the moratorium came into force) or a debt to which the company becomes or may become subject after the end of the moratorium by reason of an obligation incurred during the moratorium.


Super-priority in a subsequent Liquidation

Where proceedings for the winding up of a company begin within 12 weeks following the end of the moratorium, the liquidator must make a distribution to the creditors of the company in respect of moratorium debts and priority-pre moratorium debts (which does not include relevant accelerated debt) in priority to all other claims, save for the prescribed fees and expenses of the official receiver acting in any capacity in relation to the company. The liquidator must realise any property required to enable them to make such distributions.

Super-priority in a subsequent Administration

If within the 12 week period following the end of the moratorium the company enters administration, the administrator must make a priority distribution in respect of unpaid moratorium debts and priority-pre moratorium debts (which does not include relevant accelerated debt).  This distribution is paid out after fixed charges but in priority to insolvency practitioner expenses and remuneration, preferential creditors, the prescribed part and any party holding existing floating charge security.

The implications of these new priority arrangements are (1) that any new lender coming in to fund the company during the moratorium will have an enhanced priority for any sums due to them at the end of the moratorium and (2) this will dilute the availability of floating charge assets to pre-existing secured lenders given that they come last in the queue.

CVAs/Schemes of Arrangement

If a CVA or scheme of arrangement occurs within 12 weeks of the termination of the moratorium, note that moratorium debts and priority pre-moratorium debts cannot be compromised in the CVA/scheme.

What if there are insufficient assets to pay moratorium debt and priority pre-moratorium debt in full?

The Act provides that moratorium debts and priority pre-moratorium debts are payable in the following order of priority:

  1. first, amounts payable in respect of goods or services supplied during the moratorium under a contract where, but for the new rules protecting supplies of goods and services, the supplier would not have had to make that supply;
  2. second, wages or salary arising under a contract of employment;
  3. third, other debts or other liabilities apart from the monitor’s remuneration or expenses;
  4. fourth, the monitor’s remuneration or expenses.

The above priority provisions may leave very limited floating charge proceeds available to pay the costs and expenses of the subsequently appointed administrators or liquidators and preferential debts. If the proceeds are insufficient to pay these priority sums in full, given that the monitor’s unpaid fees rank last in the waterfall, the monitor may also find himself unpaid.

New Lending during moratorium

To the extent that new loans are advanced to the company during the moratorium which are unpaid at the end of the moratorium, such loans will have super-priority (as moratorium debt) and will be paid out of realisations ahead of a lender holding existing floating charge security. If the moratorium debt is significant, this may have a serious impact on the likelihood of an existing secured lender making any recovery in respect of its floating charge security.

How can existing lenders best safeguard their position?

As noted above, debts due to a lender fall within the definition of pre-moratorium debts without a payment holiday which the company must continue to pay during the moratorium. If the lender does not support the moratorium, it may be possible for the lender to accelerate its debt or request immediate repayment of “on demand” facilities. The company is likely to be unable to satisfy such demand, and as such, the monitor will have little option but to terminate the moratorium. Note, however, our comments above that this accelerated debt is not included in the super-priority which follows an insolvency within 12 weeks of the end of the moratorium.

Note that if a debt is accelerated before the monitor’s statement is filed, it would not fall within the definition of relevant accelerated debt. As such, whilst it could not prevent directors filing for a moratorium, that debt would be a priority pre-moratorium debt and would be payable on a priority basis in the event of an administration or liquidation commencing within 12 weeks of the end of the moratorium.

We recommend that going forward, lenders include a requirement in all new or restated facility documents that (1) the company must consult with them prior to any monitor’s statement being filed, and (2) the identity of the monitor has to be agreed with the lender prior to them being appointed. This will allow lenders to retain an element of control both in relation to the moratorium procedure and also ensure that they can accelerate their debt or take enforcement action against the company.

The Act leaves questions unanswered and we anticipate that many issues will arise in its implementation. The effect of the Act has been to rush through significant changes to the priority of the distribution of a company’s assets without any serious efforts to engage with lenders to work out the implications it may have on a lender’s appetite to lend.

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By Cathryn Williams, Paul Muscutt and Beth Bradley

The full implications of COVID-19 may not be known for some time, but it has had an immediate impact upon UK insolvency law. The government has expedited the Corporate Insolvency and Governance Act 2020 (“the Act”) through Parliament in order to support distressed businesses and assist with the UK’s economic recovery. The Bill upon which the Act is based was only published on 20 May 2020, received  Royal Assent on 25 June 2020 and thus became effective on 26 June 2020.

The speed at which the Bill passed through Parliament left little opportunity for meaningful consideration or critique. The vast majority of the Act’s provisions take effect from 26 June and we highlight below the key provisions.


The Act creates a moratorium to provide struggling businesses with breathing space.  The moratorium is initiated by a company’s directors and a “monitor” filing papers at court which confirm (1) that the company is, or is likely to become, unable to pay its debts as they fall due and (2) that it is likely that the moratorium will result in a rescue of the company as a going concern.

The moratorium initially lasts 20 business days, commencing the day after the moratorium comes into effect. It can be extended for a further 20 business days by the directors making a further filing and for up to 12 months with creditor (or court) consent. During the moratorium, only the directors can take steps to place the company into an insolvency procedure.

Certain companies are excluded, including those subject to current or recent insolvency proceedings (within the past 12 months) and certain financial institutions.

The moratorium provisions give rise to 2 real concerns for existing secured lenders. First, the Act introduces a new “super priority” in relation to moratorium debts in the event that the company enters administration or liquidation within 12 weeks of the end of the moratorium. Such debts must be paid out of floating charge assets in priority to any distribution from those assets being made to the secured lender. This will significantly dilute the lender’s security in the event a new lender advances sums to the company during the moratorium. Further, the Act prevents a lender holding a floating charge from enforcing or crystallising that charge during the moratorium. If the lender seeks to accelerate payment of its debt during the moratorium period, that debt does not rank for super priority in the event of a subsequent administration or liquidation within the 12 weeks period following the end of the moratorium.

Restructuring Plan

The Act enables the court to sanction a restructuring plan of a company (the “Plan“) that binds all creditors. Perhaps the most ground-breaking reform brought about by the Act is the notion of the “Cross-Class Cram-Down”, whereby the court can impose the Plan on dissenting creditors, provided that the court is satisfied that:

  1. A) if the Plan were to be sanctioned, none of the members of the dissenting class would be any worse off that they would be in the event of the “relevant alternative”; and
  2. B) the Plan has been agreed by a number representing 75% in value of a class of creditors or members who would receive a payment, or have a genuine economic interest in the company, in the event of the “relevant alternative”.

The “relevant alternative” is whatever the court considers would be most likely to occur in relation to the company if the Plan were not sanctioned – i.e. an administration or liquidation.

It appears that a Plan will not have automatic recognition in EU states under the European Insolvency Regulation and so even if a Plan is sanctioned by the Court, steps will have to be taken in those jurisdictions to have the Plan recognised.

Temporary Measures

The Act introduces temporary measures until at least 30 September to alleviate the pressure that the COVID-19 pandemic has placed upon UK businesses. The temporary measures include:

  • Wrongful Trading
    • The Act temporarily removes the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the pandemic.
    • The measures apply to any worsening of the company’s financial position in the period between 1 March and 30 September 2020.
    • This measure does not apply to excluded companies, including certain financial services firms.
  • Ban on statutory demands and winding-up orders
    • Creditors are temporarily prohibited from serving statutory demands and filing winding-up petitions where a company cannot pay its debts owing to coronavirus.
    • Measures aim to safeguard companies against debt recovery actions during the pandemic and allow them the opportunity to seek agreements with their wider creditor group.
    • The ban applies to winding up petitions presented from 27 April to 30 September 2020.
  • Annual General Meetings (“AGMs“)
    • The Act gives greater flexibility to hold Annual General Meetings and other meetings in a safe and practicable manner, including by way of virtual meetings, regardless of whether the constitution of the company would ordinarily permit such remote meetings.
    • Measure applies to companies under a duty to hold an AGM between 26 March and 30 September 2020.
  • Filing deadlines at Companies House
    • The Act grants an automatic extension to public companies whose original accounts filing deadline fell before 30 June 2020.
    • The Act also provides the Secretary of State with the power to make further extensions to key filing deadlines at Companies House, including the deadline for private companies to file their reports and accounts.

Termination Clauses

Subject to certain conditions, the Act prohibits suppliers from enforcing terms in contracts for goods or services which provide for automatic termination or permit the supplier to terminate the contract solely on the basis of the counter-party entering a relevant insolvency procedure.

The aim is to prevent suppliers from jeopardising the rescue of a business and to ensure that businesses can continue trading even if subject to a relevant insolvency procedure.

Will the Act achieve its aims?

The Act makes rapid and wide-ranging changes to UK insolvency legislation. We can only wait and see how the measures will work in practice, given the speed at which they have been rushed through Parliament. The impact of the new moratorium upon existing secured lenders may have unintended consequences for the appetite of lenders to fund certain assets. We can only wait and see whether the new measures will improve a company’s ability to work its way through financial difficulties

We will be providing a more detailed update for lenders on the new moratorium and its effects shortly.

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In these unprecedented times, all businesses will be facing issues they have never encountered before. The disruption caused by the measures imposed to combat the COVID-19 outbreak are significant and wide-reaching, impacting every business and its suppliers, customers, workforce, investors and lenders. At Crowell & Moring, our lawyers across the globe have extensive experience of helping clients navigate the way through these issues. Some of our representative experience in such matters is set out below. We are here to help. Please feel free to reach out to any of us to provide guidance and assistance. 

As a result of the current situation, we are advising clients who find themselves operating in the shadow of potential bankruptcies along the supply chain, in their customer base and their trading partners globally. Based on deep workout experience after past world crises, we can help clients to find and employ business strategies to minimise business disruption, salvage relationships and restructure financial facilities and business structures to facilitate ongoing trading .

Issues arising:

  • Rewriting and restructuring of financial facilities and security/collateral
  • Key customer and supplier contract reviews and negotiations
  • Potential supply chain issues and business interruption
  • Triggering of force majeure clauses
  • Landlord and tenant issues
  • Employment strategy and obligations
  • Advising on Government policies and intervention
  • Predatory pricing/supply issues
  • Diversification projects and joint ventures
  • Sale and down-scaling of non-core business
  • Acquisition of key business operations
  • Dealing with changes in the regulatory and legislative landscape
  • Advising on and implementing restructuring strategies, including formal bankruptcy processes
  • Managing international disputes
  • Managing corporate insurance claims and renewals

Representative Engagements

  • Advising a group of recruitment agencies on the impact on their agency staff of the liquidation of Carillion
  • Restructuring and selling high profile online retailer in an MBO
  • Advising PNC Financial UK as an agent for a syndicate of lenders in relation to the restructuring and recovery of £265 million in asset-based loan facilities made available to British Steel, which went into liquidation after attempts to negotiate a government bailout stalled.
  • Acted on behalf of lenders in connection with the protection and enforcement of claims in debtor restructurings and insolvency proceedings in the United Kingdom, the United States, France, Germany, Norway, and Australia.
  • Advising directors, stakeholders and insolvency practitioners in distressed scenarios including MBOs, “pre-pack” sales, restructurings, collect outs and general administration and liquidation work.
  • Advising large Chinese textiles manufacturer on cancellation / postponement of global retail orders following COVID 19 outbreak and international government sanctions.
  • In the aftermath of Black Monday on the U.S. stock market, represented the Robert M. Bass Group in working out and recovering on a portfolio of $6 million in real-estate secured loans in connection with the then-largest savings and loan failure in U.S. history. The successful portfolio workout included one of the first-ever securitizations as well as navigating through multiple corporate borrowers’ bankruptcies.
  • Represented U.S. opportunity funds against federal governments on post-closing litigation arising from disputes over several multi-billion dollar asset purchase agreements involving assets of insolvent savings and loans in the U.S., Canada, and Japan.
  • Coordinating counsel for GE Capital Real Estate in working out a portfolio of defaulted commercial loans in the South Pacific, including Hawaii and Guam.
  • Lead litigation counsel for several of the top companies in Asia in rescuing them from multi-million liabilities on important U.S. matters.
  • Represented a major S. based multinational toy company in multiple  claims related to the insolvency of its Hong Kong joint venture partner who shut down its manufacturing facilities in Guangdong province, People’s Republic of China.
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It has been reported in the press that the UK government is considering emergency legislation to reform UK insolvency laws to protect companies and directors impacted by the measures taken to combat the COVID-19 virus. The Crowell & Moring Restructuring and Finance team have issued an alert on the issues arising, a link to which is below:


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The Crowell & Moring Finance and Restructuring team have issued an alert on the operation of the Coronavirus Business Interruption Loan Scheme, including an explanation as to who can apply and the type and extent of funding available. A link to the alert is here:


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Crowell & Moring has released its Regulatory Forecast 2020: What Corporate Counsel Need to Know for the Coming Year, a report that explores the impact of regulatory changes on the technology industry and other sectors, and provides insight into the issues in-house counsel can expect to face in the coming year.

For 2020, the Forecast highlights the driving forces behind the increased regulatory focus, including access to the data, online platforms, and cutting-edge technologies that define competitive advantage. It explores regulatory trends in antitrust, environment and natural resources, and public affairs.

The cover story, “Antitrust in the Digital Age: How Antitrust Investigations into Big Tech Impact Companies in Every Industry,” discusses why there has been an increase in antitrust investigations and the effort to crack down on potential abuses among large technology companies.

 Be sure to read the full report and follow the conversation on social media with #RegulatoryForecast.

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Crowell & Moring has released Litigation Forecast 2020: What Corporate Counsel Need to Know for the Coming Year. The eighth-annual Forecast provides forward-looking insights from leading Crowell & Moring lawyers to help legal departments anticipate and respond to challenges that might arise in the year ahead.

For 2020, the Forecast focuses on how the digital revolution is giving rise to new litigation risks, and it explores trends in employment non-competes, the future of stare decisis, the role of smartphones in investigations and litigation, and more.

The cover story, “A Tangled Web: How the Internet of Things and AI Expose Companies to Increased Tort, Privacy, and Cybersecurity Litigation,” explores how the digital revolution is transforming not only high-tech companies, but also traditional industries with products, business models, and workforces that are being affected by increased connectivity, artificial intelligence, and the ability to gather and use tremendous amounts of data.

Be sure to follow the conversation on Twitter with #LitigationForecast.