The long (in relative terms) awaited Corporate Insolvency and Governance Bill was finally introduced to parliament today.
Once passed, the new legislation will put in place laws to deal with the economic impact of COVID-19 and wider changes that have been proposed for quite some time.
Some of the key temporary changes introduced by the Bill include —
- Temporary suspension of wrongful trading provisions (at least until 30 June) allowing directors to continue trading even when the business cannot pay its debts
- The ability to delay AGMs until at least September, or the option to hold "closed AGMs online"
- Suspension of the issuing of statutory demands or winding up petitions by creditors where the inability to make payment is caused by COVID-19. Any petitions which are lodged must first be reviewed by a court
The bill also brings in three permanent changes —
- A "company moratorium" where struggling company (including those that are already insolvent) are given a period of 20 days (extendable to 40 days) to put together a rescue plan. During that period creditors cannot take legal action
- Changes to termination clauses in supply contracts preventing suppliers from using contractual terms to terminate supply or increase prices if a company enters an insolvency process
- Formation of a "restructuring plan" by a company or its creditors. Dissenting creditors will be forced to sign up to the plan if a court deems it fair and reasonable. This will prevent a minority of creditors scuppering a restructuring plan that otherwise has support.
The bill has been widely welcomed, particularly the permanent changes which have been anticipated for several years but never implemented.
Many industries have been struggling in recent weeks despite government interventions, such as new loan programmes, VAT deferral and the furlough job support scheme, after the lockdown brought ordinary life to a halt