The Corporate Insolvency & Governance Bill became law today - having had its first reading just over a month ago.
In summary, the provisions in the Act allow for:
- A new moratorium giving companies breathing space from enforcement action by creditors whilst they review their potential rescue options
- A new restructuring plan (akin to Chapter 11 proceedings in the USA)
- Disapplication of supplier termination of contract provisions for insolvency (thereby requiring a supplier to continue to supply goods and services to an insolvent company in certain circumstances)
- A temporary suspension of the ability of creditors to present winding up petitions where the debtor's financial difficulties have arisen as a result of COVID-19
- A temporary suspension of wrongful trading provisions contained in the Insolvency Act 1986
The Act has rattled through the stages of the House of Commons at House of Lords at speed - but nonetheless, the Courts were putting certain of its terms into effect before it received Royal Assent. The winding up petition against Travelodge (for example) was dismissed on the grounds of the government's press release which stated its intention to prevent the issuance of winding up petitions against companies whose financial difficulties have been caused by COVID-19.
Notwithstanding some criticisms raised about the hasty drafting of the bill - it is evident that the government and the courts are on the same page: saving the economy from the financial effects of COVID-19 is in everyone's best interest.
Corporate Insolvency and Governance Bill receives royal assent