At a Glance
The UK Government published a draft Corporate Governance and Insolvency Bill on 20 May, which will implement landmark measures to improve the ability of companies to be efficiently restructured, reinvigorate UK rescue culture and support the UK’s economic recovery.
It also includes temporary measures to alleviate pressure arising from the COVID-19 crisis.
Separately, the draft Finance Bill makes two changes impacting on the restructuring and insolvency market.
This analysis summarises our initial thoughts on key aspects of the Bill (and relevant parts of the Finance Bill), which may evolve as they proceed through Parliament.
Of course, early cases will be key in clarifying parameters.
The Corporate Insolvency and Governance Bill (the “Bill”), once enacted, will introduce:
- Restructuring plan: a new flexible cross-class cram-down “restructuring plan” procedure
- Moratorium: a new stand-alone moratorium to help business rescue
- Ipso facto (termination) clauses: measures to prevent suppliers from relying on termination clauses in contracts solely by reason of the counterparty’s insolvency
- Temporary suspension of winding up petitions, statutory demands and wrongful trading: the temporary suspension of winding-up petitions and statutory demands where a company’s inability to pay is the result of COVID-19, and temporary amendments to wrongful trading provisions — to 30 June 2020, with a power for further extensions
- AGMs: temporary provision for virtual AGMs and general meetings, given current restrictions on public gatherings
- Filing requirements: temporary provision for further extensions to filing deadlines at Companies House
We understand the Bill will now proceed through Parliament on an accelerated timetable (which leaves minimal opportunity for market comment). We understand Parliament will debate the Bill from 3 June. Exact implementation timing remains uncertain; we anticipate late June.
We welcome the reforms in the draft Bill, many of which were first announced in August 2018 (see our Alert) and are being fast-tracked in light of the economic impact of COVID-19.
The reforms will help ensure the UK’s insolvency regime retains its world-leading position and reinvigorate UK rescue culture, while temporary measures will provide welcome breathing space through the COVID-19 emergency.
Separately, the draft Finance Bill provides for:
- HMRC to rank as a preferential creditor in respect of certain taxes
- potential personal liability of directors for taxes in certain circumstances involving insolvency or potential insolvency