The Corporate Insolvency and Governance Act 2020
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The Corporate Insolvency and Governance Act (the Act) entered into force on 26 June 2020. The Act represents the most significant reforms to the insolvency framework in the United Kingdom since, at least, the widespread introduction of administration under the Enterprise Act in 2003.
The government hurried through these changes, which are seen as necessary to support struggling businesses as they deal with the economic fallout from Covid-19. It should be noted, however, that many of the changes are permanent rather than temporary in nature and they will transform the way creditors and others interact with businesses in financial difficulty. The legislation is long and complex. As such, this and our related bulletins are not full and detailed analysis of the legislation but are an attempt to answer some of the immediate questions that clients are likely to have.
The legislation focuses on some permanent reforms in three key areas: a moratorium, a ban on termination provisions (or so called ipso facto clauses) and the introduction of a new pre-insolvency rescue and reorganisation. See here for more analysis on the Restructuring Plan. There are also some temporary measures such as the suspension of the wrongful trading regime and the suspension of statutory demands and winding-up petitions where financial difficulties are attributable to the Covid-19 pandemic.
Although the focus was on the permanent reforms, as stated above, the legislation did bring into play some temporary measures to assist companies who had been affected by the Covid-19 pandemic. While most of these temporary measures have ceased to apply, or will be phased out by the end of September, the Government has introduced new legislation with the objective of continuing to help businesses and commercial tenants as we ease into normality. The linked Bulletin contains an “Updates and Developments” page and covers the new legislation, namely (1) a new framework for the presentation of winding-up petitions and (2) new, permanent rules in relation to the moratorium.
Our bulletin which summarises the various measures and updates is available below: