Thursday April 9, 2020

FRP today obtained a landmark order from the High Court about how the furloughing scheme and insolvency law interacts.

FRP Partner Geoff Rowley and Phil Reynolds were appointed as Joint Administrators to Carluccio’s Limited, which operates 71 Italian restaurants and delis across the UK, on 30th March. Since then the Joint Administrators have been working to clarify how the government’s Coronavirus Job Retention Scheme (CJRS) interacts with Insolvency law.

Today (9th April) the Joint Administrators obtained an order for directions from Honourable Mr Justice Richard Snowden. The order is of real significance to any business in administration, or likely to enter administration shortly, with employees furloughed under the CJRS. The Joint Administrators were advised by Drew Sainsbury and Inga West of Ashurst LLP, and represented by Felicity Toube QC and Madeleine Jones, both of South Square.

The order confirms that Joint Administrators are at liberty to adopt employment contracts of furloughed employees when they make payments to employees, or make an application for payments under the Coronavirus Job Retention Scheme; but not before then. Crucially, this means that the employment contracts of furloughed employees have not been adopted by administrators merely by virtue of not terminating the contract of employment of that employee within the first 14 days of appointment. This provides valuable breathing space to administrators in the unprecedented circumstances created by COVID-19. It may help save jobs that would otherwise be lost.

A reasoned judgment is to follow – watch this space.