What are the current trends in legal restructuring?

Posted in Latest News on 9 Jul 2024

One of the most significant areas in the corporate and commercial law sector is the thriving field of restructuring plans (RPs).   

A recent report published by LexisNexis shows that this area of corporate and commercial law is currently looking very healthy, thanks to some big projects that have boosted an area of law that remains highly important. We felt it was worth looking into this report and examining these trends in greater detail to see how the market fared in the last year and what the rest of this year might look like for this relatively niche but also quite important sector.   

Starting with the headline figures, the report found that 64% of companies seeking RPs were incorporated in England and Wales in 2023. This was the largest region that UK firms have advised in the past year, with the second largest being Luxembourg, with 14%. This was followed by three countries in third place: Germany, Taiwan, and Italy, all with 7%. The report highlights that every RP came from England and Wales in the first half of the year, with the second half seeing a greater pick up in the overseas market. Despite the possibility of Brexit putting a spanner in the works by limiting the recognition of RPs in this market, countries starting to recognise them include the Netherlands, Luxembourg and Germany, with several other countries beginning to recognise them too. These countries show that the UK’s legal services are still highly sought after despite the economic turmoil of the last few years. For the vast majority of challenges, the outcome was, more often than not, approved, but some variations in the types of outcomes were likely to happen. Private creditors were more likely to be approved than those from HMRC or any former CEOs. The data currently shows a tendency for more challenges, too, and some key themes were starting to emerge, such as whether the RP was fair or whether anyone was worse off because of the action.   

The other major takeaway from the report was the sectors that were using these RPs. The sectors that were using them largely, are those that were currently experiencing the most distress economically, which makes sense as to why they would want or need to restructure. The energy sector was the most likely to use RPs, with 29% of all RPs from last year coming from companies in this sector, while the real estate and construction sectors accounted for 14% each. The report finally highlights what is to come in 2024 and says there might have been a slight slowdown at the beginning of the year, but it points to several factors that it says will lead to an increase in the use of RPs in the coming year. It seems like there are an increasing number of factors that will cause businesses to need to look to restructurings, such as high energy prices, high interest rates, import and export delays post-Brexit, supply chain delays, and the war in Ukraine will all have an influence on the use of RPs, keeping this sector buoyant.  

So, this report makes for some interesting reading. There’s a lot of detail to pour over, but to summarise, it seems like the market for restructuring plans continues to build up, and there are plenty of opportunities for the corporate and commercial sectors to grow.  

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