1489313 - Hogan Lovells FIS Horizons 2021 update - Flipbook - Page 22
Hogan Lovells
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– The debtor can ask the court to preapprove the contractual arrangements it
intends to enter into after it has launched
its restructuring efforts pursuant to the
WHOA. If the court grants this pre-approval,
the debtor is protected from clawback and
challenge actions if the debtor were to
become insolvent. Such pre-approval would
enable the debtor to grant security and
attract (bridge) financings without the risk
of clawback and challenge actions.
The WHOA, unlike similar schemes in other
jurisdictions, has an advantage when it comes
to the restructuring of a multinational group
of companies. Not only does the WHOA
provide a platform for the restructuring of
group liabilities through a single procedure
(regardless of the guarantors’ home jurisdiction),
the court-approved restructuring plan will be
automatically recognized within the EU under
the Recast Insolvency Regulation (applying to
the public procedure). A group of companies
may combine the public procedure and the nonpublic procedure. All this means that the WHOA
is a state-of-the-art law that allows for global
restructurings with the flexibility of a UK Scheme,
combined with the moratorium and certainty of
the US Chapter 11, but at a lower cost and within a
short time frame.
2
Virgin Atlantic and PizzaExpress
The UK
On 26 June 2020, the Corporate Insolvency and
Governance Act 2020 (“CIGA”) came into force,
a mere 37 days after the first draft was published.
One of the permanent measures introduced as
Part 26A of the Companies Act 2006 (CA06) is
the restructuring plan (plan). The plan process
is similar in many respects to the current scheme
of arrangement (scheme) process under Part 26
CA06 (which will remain in place and remains
an option for companies seeking to compromise
their debts). This is intentional – the explanatory
notes to CIGA states that the overall commonality
between Part 26 and Part 26A will enable the
courts to draw on the existing body of Part 26 case
law where appropriate. This has certainly proved
to be the case in the two plans which have so far
gone through the courts2. In summary:
•
The plan process is open to UK companies and
unregistered companies liable to be wound up
under Part V of the Insolvency Act 1986 (IA86)
and so will be open to overseas companies
provided certain conditions are met, including
that they have a sufficient connection to this
jurisdiction. In the last decade, a significant
number of overseas companies have used an
English scheme to effect a restructuring and it
is likely that the plan will also prove popular,
given its additional features.
•
Unlike the scheme requirements, to be
eligible a company must show that it has
encountered or is likely to encounter financial
difficulties that are affecting or will or may
affect its ability to carry on business as a going
concern and there must be a compromise or
arrangement proposed between the company
and any of its creditors or members which is
intended to eliminate, mitigate or prevent the
financial difficulties.
