The government has introduced the Corporate Insolvency and Governance Bill in Parliament, which will put in place a series of measures to amend insolvency and company law to support business to address the challenges resulting from the impact of coronavirus (COVID-19).
What do we know so far?
The insolvency measures will provide vital support to businesses to help them through this period of instability. The corporate governance measures will introduce temporary easements and flexibility to businesses where they are coping with reduced resources and restrictions.
This Bill will do this through:
- introducing a new moratorium to give companies breathing space from their creditors while they seek a rescue;
- prohibit termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process;
- introducing a new restructuring plan that will bind creditors to it;
- enabling the insolvency regime to flex to meet the demands of the emergency;
- temporarily removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency;
- temporarily prohibiting creditors from filing statutory demands and winding up petitions for coronavirus related debts;
- temporarily easing burdens on businesses by enabling them to hold closed Annual General Meetings (AGMs), conduct business and communicate with members electronically, and by extending filing deadlines; and
- allowing for the temporary measures to be retrospective so as to be as effective as possible.
What difference will the changes make?
The Bill has three key main purposes:
- to introduce new corporate restructuring tools to the insolvency and restructuring regime to give companies the breathing space and tools required to maximise their chance of survival;
- to temporarily suspend parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability and to protect companies from aggressive creditor action; and
- to amend Company Law and other legislation to provide companies and other bodies with temporary easements on company filing and annual general meetings (which will extend to charitable incorporated organisations and mutual societies) thus allowing them to focus their resources on continuing operations in this uncertain time.
Support for businesses
Our Dispute Resolution team has been digesting these changes and is ready to advise businesses on the implications now and once the Bill passes into legislation.
Click here if you would like to speak to a member of the team.