Corporate Insolvency and Governance Bill becomes law

26th June 2020

The Corporate Insolvency and Governance Bill became law on 26 June 2020 to provide support to businesses, in what has been described as the biggest shake-up of insolvency laws for two decades.

We have previously covered what the Bill includes, here, and although some of the measures come into effect immediately (such as automatic filing extensions), other measures will require additional regulations prior to implementation.

The Act:

  • introduces a moratorium to give companies breathing space from their creditors while they seek a rescue
  • prohibits 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
  • introduces a new restructuring plan that will bind creditors
  • enables the insolvency regime to be more flexible
  • temporarily removes the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency
  • temporarily prohibits creditors from filing statutory demands and winding up petitions for coronavirus related debts
  • temporarily eases 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

Changes taking effect immediately

Accounts

Companies and other types of business registered at Companies House will get more time to file accounts.

The filing deadline will be updated automatically by Companies House, so there is no need to apply for an extension.

There are changes for public companies with a filing deadline between 26 March 2020 and 29 September 2020.

Insolvency breathing space

There is a new moratorium giving companies breathing space from their creditors while they seek a rescue. The Act also introduces a new restructuring plan sanctioned by the court that will bind creditors to the plan.

Directors will still need to meet their filing obligations with Companies House and late filing penalties will still be applied where accounts are filed late. 

The restructuring plan takes effect when a copy of the court order is delivered to Companies House.

(See Companies House liquidation and insolvency guidance.)

Measures requiring secondary legislation

Under secondary legislation, companies will receive an automatic extension for:

  • confirmation statements
  • registrations of charges (mortgage)
  • event-driven filings, such as a change to a company’s directors or people with significant control

Most companies will also be given more time to file their accounts.

More guidance for private companies and other company types will be published once secondary legislation comes into force.

In the meantime, if you would like to discuss these issues, please contact a member of our Restructuring team.

Other government measures already in place to support businesses and workers during the coronavirus emergency can be found in our Business after COVID-19: Transition Knowledge Hub.

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