Corporate Insolvency and Governance BillPublished on: 01 July 2020
In an attempt to provide for businesses in need, following the COVID-19 crisis, the Corporate Insolvency and Governance Bill is set to assist these businesses to ensure their future security and to allow for any necessary restructuring to increase their chances of survival.
What needs to be recognised by business owners, and solicitors alike is that, due to the speed at which the Bill has been drafted (in an attempt to provide solutions as soon as possible) amendments, alterations and additions should be expected. As well as this, there are temporary and permanent measures, meaning that the legislation needs to be followed carefully to ensure that as a business, you are able to benefit as much as possible.
There are three main aims of the Bill:
- To introduce new corporate restructuring tools.
- To temporarily suspend parts of insolvency law to support directors to work through the COVID-19 crisis without fearing personal liability.
- To amend company law and other legislation to provide businesses with temporary easements on company procedure.
Overall, the Bill aims to provide businesses, who were trading successfully before COVID-19, with the breathing space and necessary tools to maximise their chances of survival.
There are certain protections that have been put in place to prevent a company from going into liquidation. Firstly, a company moratorium is available to be obtained by the directors of the company when, and if, they make a statement to an appointed monitor, that the company is, or is likely to become, unlikely to pay its debts. This moratorium allows the company a protection period of 20 working days’ to restructure and rescue the company. During this time, no creditors can bring legal action against the company.
Secondly, a restructuring plan has been proposed which is similar to the existing Scheme of Arrangement. This plan allows a company in difficulty, its creditors or its members/shareholders to propose a restructuring plan. Court approval is required to approve the plan and the aim is to enable a company to restructure in an attempt to save itself from liquidation.
Thirdly, on a more temporary basis, and very importantly for a lot of businesses, Companies House formalities have been eased. This decision is down to practical and logistical challenges being faced by businesses.
There are a number of other changes that are to be brought into force through this Bill, covering wrongful trading and winding up provisions. These provisions aim to prevent directors from personal liability when they act to try and rescue the company, when in normal circumstances, their actions would be condemned.
The Corporate Insolvency and Governance Bill received Royal Assent on 25 June 2020 and may be able to provide assistance for your Company. For more information or for any advice on your company needs, please contact our Corporate and Commercial department.