Key Trends for 2022 – Insolvency and Dispute Resolution

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The impact of Covid-19 is clearly the big talking point for 2022, with several questions arising: will new variants emerge, what measures will governments take to limit the spread and what impact will this have? it about industries? To date, enforcement, insolvency and restructuring actions have been relatively light, but with further restructuring law reforms on the horizon and creditors beginning to fast-track enforcement, it seems likely that there will be an increase in liquidations and cross-border transactions. restructuring works.

Looking ahead to 2022, from our position as primarily offshore lawyers, we have identified some specific trends on the horizon for the benefit of all of our clients – onshore advisors, banks, asset managers, trustees, corporates, insolvency and individuals.

Bermuda: Enforcement increases as lenders begin to lose patience

A notable trend has developed whereby creditors, particularly financial institutions, seem to move more quickly to formally enforce their rights through liquidation petitions. This is particularly the case for debtor companies operating in Asia. Lenders seem less willing to wait to see if the market improves or if a borrower’s fortunes change. We see a lot more instructions to act quickly to seek winding-up orders. This is not a trend that we believe will abate in 2022. A corollary to this appears to be how the Bermuda court approaches the application and use of Bermuda’s light interim winding-up regime to support the restructuring. The court is of course still willing to issue a first order appointing provisional liquidators for restructuring purposes. That said, the dissent from creditors seems to have led the court to expect more advanced and elaborate restructuring plans earlier in the process and to consider those proposals quite carefully.

IVB: Interest injunction route in asset protection

Like Bermuda, creditors of BVIs, particularly when loans are in place to finance operations in Asia, want to move as quickly as possible to liquidation proceedings in the event of default in the event of non-existent or insufficient. Complex and long restructurings do not seem favorable, at least insofar as they involve the Court via schemes of concordat or simplified provisional liquidation. Where liquidation and provisional liquidators may not be appropriate, but there is still a need to protect assets pending determination of claims, an important development in 2021 has been the placement of injunctions in support of claims abroad on a statutory basis (by enactment of Section 24A of the Supreme Court Act). We have already seen these provisions successfully used to obtain injunctions and we hope this will continue in 2022.

Cayman: Legal Reforms Open New Restructuring Options

The Cayman Islands insolvency law reforms are expected to come into force in early 2022, providing practitioners with an alternative restructuring tool. Amendments to the Companies Act have established a new restructuring agent regime available to companies in financial difficulty, which can be accessed without filing a petition for liquidation. One of the main benefits of the new regime is the immediate statutory and worldwide moratorium that will take effect upon filing of the application for the appointment of restructuring agents with the Grand Court, similar to the Chapter 11 regime in the United States. Another important reform is the removal of the “majority in number” or “count” test for shareholder arrangement plans, so that only the “majority in value” test needs to be met to approve a shareholder arrangement plan proposed to the relevant meeting. (s).

Guernsey: Regulatory action likely as Moneyval inspection looms

We expect Moneyval’s next assessment in 2023. The visit will be the first since 2016 and Guernsey should be ready to present a picture of strong regulation. Key aspects from the GFSC’s perspective are likely to be its ability to demonstrate prosecution for money laundering offences, significant penalties imposed on licensees in violation of AML/CFT regulations and that the civil forfeiture regime is used. effectively. Guernsey has a legitimate need to demonstrate its continued commitment to developing international standards and such actions will inevitably remain an important part of that. This may lead to increased enforcement actions and lawsuits in the window before Moneyval visits. This is something that regulatory lawyers – and especially those who deal with regulatory disputes – are very focused on for 2022.

Ireland: The attitudes of secured lenders will be decisive

Insolvency rates have been relatively low during the pandemic, but as economic conditions improve and government support measures diminish, there will be an increase in corporate restructurings and insolvencies. We anticipate that Ireland will be a key jurisdiction for cross-border restructurings after Ballantyne Re, Nordic Aviation Capital and Norwegian Air in 2020 and 2021. will support via consensual restructurings, or actions in guarantee or debt collection. We also expect some loans to be conditional on being assigned to third parties, some of whom will have their own lending strategies. For SMEs, the first applications of the recently enacted Small Business Administrative Rescue Procedure (“SCARP”) will be watched closely. Advisers will want to check whether SCARP will provide SMEs with a viable, lower-cost process for achieving consensual restructurings with creditors.

Jersey: Uncertainty likely to lead to more trust litigation

Families are increasingly looking for ways to restructure their estates or distribute interests among family branches. This will result in important decisions for trustees and may also see them (and other trustees) subject to scrutiny and even attack. The Court will inevitably be faced with requests from directors for the blessing of momentous decisions (such as restructurings or layoffs), or beneficiaries seeking to remove incumbent directors. Not only do we expect the level of contentious situations within trusts to continue to grow, but it is inevitable that the economic downturn will lead to disputes and claims regarding the ownership of assets held in trust or possibly the specter of decline in the value of a trust’s assets below its borrowings, leading to considerations of the complex interplay between insolvency and trusts.

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