The government has recently introduced a new Corporate Insolvency and Governance Bill to parliament for its first reading. To a large extent this bill has been brought to parliament as part of the government’s response to Covid-19. While some of the content is a temporary response to Covid-19 other parts are changes to the insolvency legislative framework that have been in the pipeline for some time.
Key points from Bill include:
- Easing of regulatory requirements
- The bill introduces temporary easements on filing requirements and Annual General Meetings (AGMs)
- Prohibition of winding-up petitions. The bill prevents creditors from presenting winding up petitions (unless they believe Covid-19 hasn’t had an effect)
- The suspension of wrongful trading provisions
- The provisions do shift the balance so to offer a certain amount of comfort to directors but that comfort is limited. The provisions only relate to the period between 1 March and 30 June 2020. There remains considerable exposure for directors of insolvent companies rack up losses in the shape of claims for misfeasance and breach of duty.
- New corporate restructuring tools – These are intended to give companies the time they need to maximise their chance of survival. Among the measures are:
- A new Moratorium. Companies will be able to make use of a new 20-day moratorium. During that period creditors will be prevented from taking action
- Protection of supplies of goods and services – Where a company is subject to an insolvency procedure provisions of the bill will prevent suppliers from cutting off their supply of goods and services. This is intended to allow the business to continue to trade for a period of time while decisions are made as to whether and, if so, how the business can be rescued.
- A new restructuring tool – A court-sanctioned compromise or arrangement.
The bill needs to progress through a number of stages before it can become law and may yet be subject to modification. Nothing will change until that legislation is introduced.
Full details of the bill can be found here – https://services.parliament.uk/bills/2019-21/corporateinsolvencyandgovernance.html