Corporate Insolvency and Governance Bill published
The eagerly awaited Corporate Insolvency and Governance Bill was published by government yesterday. The draft legislation, which runs to 238 pages, will implement the biggest reforms to insolvency law and practice in Great Britain for almost 20 years. It also introduces a number of temporary changes to the corporate governance requirements for companies and other companies.
The measures contained in the Bill include those announced in recent months by the government to help businesses affected by the coronavirus pandemic survive. Some of these are temporary, and will provide additional protection for the duration of the worst of the crisis, and others are permanent wide-ranging changes designed to provide further options for business rescue.
We will be publishing more in-depth guidance on the detail of the reforms over the coming weeks, but here are a summary of the changes:
- A new company moratorium will give struggling businesses a 20-day pause on legal action being brought against them, so that they can consider a rescue plan. This is extendable for a further 20 days, or up to a year if creditor consent is secured.
- A new restructuring plan, similar to the existing English Scheme of Arrangement, will allow companies in financial difficulties (or their creditors or members) to put forward a new restructuring plan as an alternative rescue option. This will sit alongside the existing choices of administration and company voluntary arrangements, which both allow a company to trade through its financial difficulties.
- Termination clauses in supply contracts will no longer be allowed to be invoked when a company has entered an insolvency or restructuring procedure, or obtains a moratorium. This will prevent suppliers ceasing supply, or varying contract terms by for example increasing the price of supplies.
- The use of statutory demands and winding-up petitions will be prohibited until 30 June, or a month after the Bill comes into force. This is designed to prevent aggressive creditor action against otherwise viable companies struggling because of COVID-19 (see our previous blog on this in the context of commercial tenants here).
- Wrongful trading provisions will be relaxed between 1 March and 1 June 2020, to help protect directors when making difficult decisions around continued trading during the initial period of the pandemic. They do not provide a blanket suspension of the wrongful trading provisions, however.
- AGMs and other general meetings can be held by other means, even if not normally allowed by their articles of association.
- The Secretary of State will be able to make extensions to certain company filing deadlines such as accounts, confirmation statements and registrations of charges.
- Certain financial services firms have been excluded from some of the reforms. This will protect existing special insolvency regimes in this sector and ensure the legal certainty needed to allow the efficient functioning of financial markets.
If you think any of these reforms may affect your business and would like further advice, please contact Joanna Ford on 01892 489583 or firstname.lastname@example.org.