Q&As

Is coronavirus (COVID-19) a force majeure event that could impact company voluntary arrangement, individual voluntary arrangements or schemes of arrangement?

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Produced in partnership with Aman Sehgal of Keystone Law
Published on LexisPSL on 30/03/2020

The following Restructuring & Insolvency Q&A produced in partnership with Aman Sehgal of Keystone Law provides comprehensive and up to date legal information covering:

  • Is coronavirus (COVID-19) a force majeure event that could impact company voluntary arrangement, individual voluntary arrangements or schemes of arrangement?
  • Event
  • Performance
  • Mitigate
  • Practical steps

Is coronavirus (COVID-19) a force majeure event that could impact company voluntary arrangement, individual voluntary arrangements or schemes of arrangement?

While the effect of a scheme of arrangement is not exactly the same as a company voluntary arrangement (CVA) (as a scheme has binding force by operation of statute), the Companies Act 2006 does not prescribe the subject matter of a scheme, and parties must look to the terms of the scheme to determine its effects. See Practice Note: Effect of schemes of arrangement and release of security.

For CVAs and individual voluntary arrangement (IVA), it is entirely dependent upon the arrangement and how the force majeure clause in the CVA and/or IVA is drafted. It is necessary to review the specific wording of the force majeure provision to determine whether coronavirus (COVID-19) is a force majeure event. The majority of IVAs use either the IVA Protocol or R3’s standard conditions. Neither contains a force majeure clause. There are no industry standard terms for CVAs.

If the scheme, CVA or IVA contains a specific provision, it must still be proven that it affected the performance and the affected party took steps to avoid or mitigate the event. In any event, it is important for the affected party to be upfront with the supervisor of the scheme/IVA/CVA and explain their changed circumstances due to coronavirus.

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