Banking and Finance update - February 2021

03 Feb 2021

Welcome to our first edition of this bulletin in 2021 – hopefully a better year for everyone than 2020. We are working remotely for the time being and we appreciate the ongoing support of our clients.

Our coronavirus hub continues to provide updates on key issues for business and personal lives. This bulletin concentrates more generally on issues relevant to the banking, finance and insolvency fields. It also gives me an opportunity to welcome Oliver Jackson (email: who has recently joined us as a partner specialising in insolvency and business recovery.  

If you have any queries on the topics in this bulletin or you would like us to cover any particular issues in the future, please get in touch with me, Gwen Godfrey, or your usual contact here at DMH Stallard.

Changes to Crown Preference Rules

On 1 December 2020 changes to the Crown preference rules came into effect. They will be important to those holding security from a company which becomes insolvent.

In an administration or liquidation, fixed chargeholders and preferential creditors rank in priority to floating chargeholders (whether or not the floating charge has crystallised). The new rules have reintroduced partial Crown preference in relation to some debts owed to HMRC. They mean that, potentially, the amount owed to preferential creditors will be larger so that a lesser amount of recoveries will be available to pay floating chargeholders.  

Often a secured creditor holds a debenture containing fixed and floating charges. It will be important for anyone in this position to ensure that as many assets as possible are subject to fixed charges – which means that the asset charged is identifiable and expressed to be subject to a fixed charge. This will not be the case if the asset is not identifiable in the debenture or other security document, for example, where a property is acquired after the security was granted. 

It may be an opportune time for security documents to be reviewed and new fixed charges taken where a company has any valuable assets which are not identifiable as being subject to fixed charges. Lenders may also want to consider including information reporting requirements relating to borrowers paying taxes on time within their lending agreements. 

For further information please contact Gwen Godfrey or Oliver Jackson.

Update - Corporate Insolvency and Governance

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) and its related regulations made some permanent and some temporary changes in these areas, as mentioned in our November 2020 edition. Some of the temporary changes have been extended as follows.
  • Small supplier exemption from the restrictions on termination of the supply of goods or services, and some of the temporary provisions regarding moratoriums have been extended to 30 March 2021
  • In addition, there are currently extended deadlines for filings of accounts and charges and delivery of confirmations at Companies House
  • Previous extensions relating to the relaxations regarding company meetings and limitations on winding up petitions have now come to an end. However, Companies House has recently announced that it has temporarily paused its voluntary and compulsory strike off processes from 21 January to 21 February 2021
We have been giving Zoom presentations on CIGA 2020 to clients and contacts. If you would be interested in  one, please contact Tyne Harman.

How to Sign Documents - Updated Land Registry Guidance

The pandemic has had many effects on the way we do business and has accelerated some changes. Over the years the use of  “wet ink” signatures and the physical delivery of original documents had been supplemented by other ways of signing and completing them. 

The Law Society produced a practice note in 2010 on the execution of documents by virtual means. It includes an “Option 1” for execution of deeds where a scanned manuscript signature and a final version of the relevant deed are emailed as part of the process, often referred to as a “Mercury PDF signature”. More recently the use of electronic signatures and e-signing platforms have become increasingly popular, given that those working remotely may not always have access to printers and scanners.

On 21 December 2020, HM Land Registry updated their Practice Guide 8 on the execution of deeds. It sets out their requirements for each of these methods of signature in relation to deeds which have to be registered with them (such as transfers and charges). It specifies that a witness must not be a party to a deed in his or her own right and ideally should be over 18. The witness must be actually present when the deed is signed but can be separated by glass, such as a car or house window, which again can be helpful in the current circumstances. 

If you require any further information on this topic please contact Katie Layton.

LIBOR Transition - The Final Countdown

There is only 11 months to go and by the end of 2021 all loan market participants need to be in a position to lend or borrow based on Risk Free Reference Rates (RFRs) and not LIBOR.

Ahead of that deadline there should be no new Sterling LIBOR loans from Q2 2021 and the active conversion of  existing Sterling LIBOR agreements, where viable, needs to be completed in Q4 2021. As with other jurisdictions, the UK Financial Services Bill includes legislation which would deal with “tough legacy contracts”, but wherever possible it will be preferable to have agreed on a contractual conversion before the deadline.

The Loan Market Association (LMA) is well advanced with documentary preparations, having published its exposure drafts for new sterling based RFR facility agreements in 2020 and its exposure drafts for multicurrency facility agreements on 28 January 2021. These will not be converted into LMA recommended agreements until the market has grown used to using them. 

ISDA has also been making progress with the publication of its IBOR fallbacks supplement and also its IBOR fallbacks protocol which can be adopted bilaterally. Loan agreements backed by hedging need to be checked to see if any amendments are required to them before the protocol is adopted. 

The LMA is  encouraging active engagement by lenders and with borrowers to scale up the use of RFR based loan facilities and underpin the transition throughout the rest of 2021.   

If you require any further information on this topic please contact Gwen Godfrey or Katie Layton.

Further reading

Ganz v Petronz FZE & Goren – key decisions of the arbitration claim

Blog, Legal Updates
The recent Judgment in the arbitration claim Mordchai Ganz v (1) Petronz FZE (2) Abraham Goren [2024] EWHC 635 has already received attention from legal pundits.  The DMH Stallard’s legal team (Tim Ashdown, Beatrice Bass and Patrick Murray) acted for the Claimant. DMH Stallard was supported by the legal team of Altshuler Law in Israel which is a collaboration enabled through their membership of LEInternational.
Read more Read

Reversal of changes to High Net Worth Individual and Self-certified Sophisticated Investor criteria implemented

Blog, Legal Updates
As discussed in our recent update, the government announced in the Budget that the eligibility criteria for the exemptions, which allow shares and other financial instruments to be marketed to High Net Worth Individuals and Self-certified Sophisticated Investors without the regulatory protections
Read more Read

FCA to investigate personal guarantees in small business lending following a super complaint

The FSB has raised concerns that the demand for personal guarantees by lenders has a detrimental impact on small businesses accessing borrowing to grow
Read more Read

ECCTA: Fundamental changes for companies and considerations for lenders: Practical points to note

Tyne Harman outlines some of the key considerations for lenders and borrowers alike to be aware of.
Read more Read
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