The Corporate Insolvency and Governance Act 2020 (the Act) came into force on 26th June 2020.  Having been published on 20th May, it speeded through parliament and received Royal assent on 25th June.  It is designed to help businesses in difficulty that need to restructure, to increase their chances of survival during these turbulent times.

Whilst wide-ranging reform of the insolvency legislation had been planned for some time, the unprecedented challenges caused by the COVID-19 pandemic forced the government to bring the timetable forward and significantly condense a process that would normally take over a year into just a matter of weeks.

The resulting Act contains both temporary and permanent legislation that should support a culture of business rescue and restructuring during the current unusual times and beyond.

It should be noted, that given the speed with which the legislation was pulled together, the government has made it clear that it is likely to remain a work in progress with additions, amendments and corrections expected over time.  Furthermore there are a number of areas where the government appears to have left it to the Courts to resolve any issues which are not made clear by the new legislation.  Therefore trade creditors, landlords, lenders and directors will all need to take advice on their respective positions when operating with businesses in distress during the next few months. 

We’ve summarised the key elements of the Act below – full details can be seen here.

PERMANENT REFORMS

Company moratorium

Restructuring plan

Termination / “Ipso Facto” clauses

TEMPORARY MEASURES

As noted previously, a number of temporary measures have been brought in as a result of the COVID-19 pandemic.

Suspension of wrongful trading liability

Statutory demands and Winding Up Petitions

Companies House formalities

A number of other changes have been introduced in relation to compliance with Companies House regulations:

If you feel any of our team of specialists can help then don’t hesitate to get in touch with your Leonard Curtis Legal team.

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