Following its Royal Assent on 26 June, the Corporate Insolvency & Governance Act 2020 is the largest change to the UK’s corporate insolvency regime in more than 20 years. It introduces new corporate restructuring tools alongside temporary easements to give distressed businesses the breathing space they need to get advice and seek a rescue.
The Act can be broadly split into two sections:
- Insolvency provisions and
- Corporate Governance provisions
Many of the provisions contain temporary measures designed to provide businesses with flexibility and a breathing space in response to the COVID-19 pandemic.
Some of the measures dealing with governance provide greater flexibility in holding company meetings and filing requirements. For example, AGM’s can be held as closed meetings with a minimum quorum, with electronic meetings allowed between 26 March and 30 September 2020. There are also filing extensions until 5 April 2021.
One of the key insolvency provisions is the introduction of the new role of a Monitor to oversee the corporate moratorium it introduces – an extendable 20 working day period giving businesses protection from creditor action while they seek professional restructuring advice.
A Monitor must be a licenced insolvency practitioner and the Insolvency Service has provided guidance on their role and responsibilities.
The Act also extends the suspension of termination clauses when a company enters into an insolvency procedure and introduces a new restructuring plan that has the ability to bind creditors to it.
Adding to this, the Act also provides temporary relief until 30th September 2020 from being subject to a winding-up petition and from wrongful trading provisions where a business can demonstrate its difficulties arise from trading conditions arising from the current pandemic.
Overall, the legislation has been designed to save businesses and preserve jobs.
For more information or advice to support you and your business through this difficult time, contact Andy Pear or Mike Solomons.