The Corporate Insolvency and Governance Act 2020 – the most significant insolvency reforms in the UK for a generation
24 March 2021
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.
Our bulletin, which summarises the various measures is available below: