With a sharp global increase in energy costs, localised inflation at record highs and interest rates trying to offer some counterbalance to the soaring costs of living driven by the increases in prices of goods and services, many companies will now, literally, struggle to keep the lights on, so an increase of insolvent restructuring is inevitable to some degree.
However, emergence into the world's "new normal" during this late stage of the pandemic will see some businesses turning keener focus to long-term sustainability, good governance and management, structural rationalisation and a drive for cost efficiencies. We should see larger volumes of non-contentious restructuring as a result, whether through private equity-backed takeovers, bond or debt restructurings and/or intricate internal reorganisations, all of which we are starting to see in the market.
Credit institutions will undoubtedly play their part in the financial markets by working with businesses to amend existing credit facilities to help stabilise the uncertainty of potential insolvent restructuring scenarios.
However, with China – one of the world's largest net-exporters – continuing to pursue a zero-COVID policy, and with soaring energy prices exacerbated by Russia's invasion of Ukraine, the longer-term global supply-chain disruption may well lead to further insolvent casualties that non-contentious restructuring may not be able to save.
Please get in touch with your usual Ogier contact or any member of the team to discuss these topics further.
Jersey partner James Angus, Guernsey partner Alex Horsbrugh-Porter, Cayman partner Shaun Maloney and Cayman senior associate Marie Skelly recently attended the FIRE Starters Global Summit in Dublin. In this article, they share a short overview of some of the sessions they attended.
To help BVI hedge funds navigate the myriad of issues brought on by recent events, this advisory offers a high-order checklist for fund directors and investment managers to consider. This checklist is arranged under three main topics: operational issues, issues around liquidity and possible termination, and communication and reporting considerations.
The UK government attempted to ease the financial strain of the COVID-19 pandemic with, among other things, rent "holidays" for tenants and the opportunities for loans for certain businesses. While some businesses were able to avail themselves of such measures, not all were eligible or able to utilise such schemes. It seems that commercial landlords have been one of the sectors that have been hit hard, especially with some commercial tenants not surviving the downturn.
The Royal Court of Jersey may grant a winding up order on the grounds that it is just and equitable to do so pursuant to article 155 Companies (Jersey) Law 1991. This can apply to a solvent or insolvent company. It is similar to the statutory powers of the English courts under section 122(1)(g) Insolvency Act 1986. Although the Royal Court will have regard to English case law in assisting their interpretation of "just and equitable", recent Jersey case law appears to have developed a much wider discretionary application. This has inevitably led to the widening of circumstances in which such an order will be granted in Jersey.
After a lengthy consultation period, Jersey's legislature recently passed the Companies (Amendment No.8) (Jersey) Regulations 2022 amending the Companies (Jersey) Law 1991. This amendment has introduced a new insolvency remedy for creditors of Jersey companies with effect from 1 March 2022. This is an important development for the insolvency legislation of Jersey, bolstering the jurisdiction's position as a leading international finance centre.
How should liquidators deal with the administrative burden of adjudicating thousands of low-value proof of debts in a liquidation estate, without exhausting the limited assets available in the liquidation estate? The Grand Court recently sanctioned a pragmatic solution.
In its January 2022 decision of In the matter of Evergreen International Holdings Limited, the Grand Court of the Cayman Islands ordered the immediate winding up of Evergreen International Holdings Limited. This decision builds on a consistent thread running through the cases: while the Cayman Court remains willing to support genuine efforts by companies to restructure, when an insolvent company fails to be proactive and take tangible steps for a restructuring in the face of undisputed creditor claims, the Court will enforce the creditors' rights to an immediate winding up order.
The Cayman Islands Court of Appeal has recently delivered helpful clarification on the principles which apply with respect to security for costs when the official liquidators of an insolvent fund seek to bring claims against its former management. Where it is clear to the Court that a defendant was responsible for management decisions immediately before a company entered insolvency, the Court may exercise its discretion, notwithstanding the impecuniosity of the plaintiff company, not to order payment of security for costs.
The principle of "modified universalism" has recently come under scrutiny in the case of Investin Quay House Limited (in liquidation) v BUJ Architects LLP. While the Royal Court of Jersey was principally concerned with whether or not to exercise its discretion to impose an interim injunction, the underlying legal issue was the application of Universalism.