CORPORATE INSOLVENCY AND GOVERNANCE BILL
The Corporate Insolvency and Governance Bill (“the bill”) contains important changes to corporate insolvency law.
The Bill is designed to help companies maximise their chances of survival, protect jobs and help the economy recover in response to the Covid-19 crisis.
The Bill has had its first reading in Parliament and may be amended as it progresses through the Parliamentary approval process.
The new Bill currently consists of eight measures designed to support businesses during the Covid-19 Crisis.
The moratorium has been introduced to give companies in difficulty, including as a direct result of Covid-19, formal breathing space to pursue a rescue plan. During the moratorium, legal action cannot be taken against a company without court approval.
IPSO FACTO (TERMINATION) CLAUSES
The ipso facto clauses will prevent suppliers from stopping or threatening to stop supplying businesses going through an insolvency or restructuring procedure. There will be a safeguard to ensure that continuing supplies are pad for. However, if the supply process causes hardship to their business, suppliers will be relieved of this requirement should the court agree. Small company suppliers will be temporarily exempt during the Covid-19 response situation.
Firms that are viable but experiencing difficulty with debt liabilities will be able to restructure under a new procedure. The courts will sanction this procedure based on whether it is fair, equitable and in the interest of creditors. Creditors vote on the plan, but the courts will also have the power to impose it.
SUSPENSION OF WRONGFUL TRADING
The threat of directors’ personal liability from wrongful trading will be removed. While this suspension is in place, action will not be able to be taken by liquidators and administrators against directors of insolvent companies for creditor losses as a result of continued trading. All the other checks and balances on directors will remain in place.
STATUTORY DEMANDS AND WINDING UP PETITIONS (TWO MEASURES)
So that companies have the chance to come to pragmatic and fair agreements with creditors, the threat from unpaid debt due to the pandemic will be removed. Statutory demands issued against businesses will be void.
ANNUAL GENERAL MEETINGS (AGMs)
With gatherings of multiple individuals not currently permitted, the Bill allows companies that must legally hold an AGM or GM to do so by other means – even if company protocol does not normally allow this.
Companies House has made changes to filing requirements during the COvid-19 emergency, including extending deadlines and therefore countering the threat of penalties for late submissions. More flexibility may be required, so the Bill gives the Secretary of State the power to implement further extensions.
As the Bill progresses through Parliament we will keep you updated, but if you would like any further information on these proposed changes then please do not hesitate to give us a call. We can be contacted in a number of ways, telephone, email. WhatsApp, linked in etc. and we can hold virtual meetings should you so wish.