Government introduces Corporate Insolvency and Governance Bill

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03 Jun, 2020

The Government has introduced the Corporate Insolvency and Governance Bill in Parliament.

The overarching objective of the Bill is to provide businesses with the flexibility and breathing space they need to continue trading in a COVID-19 environment. The measures are designed to help UK companies and other similar entities by easing the burden on businesses and helping them avoid insolvency during this period of economic uncertainty.

The Bill has three main sets of measures to achieve its purpose:

  • to introduce greater flexibility into the insolvency regime, allowing companies breathing space to explore options for rescue whilst supplies are protected, so they can have the maximum chance of survival;
  • to temporarily suspend parts of insolvency law to support directors to continue trading in a COVID-19 environment without the threat of personal liability and to protect companies from aggressive creditor action; and
  • to provide companies and other bodies with temporary easements on company filing requirements and requirements relating to meetings including annual general meetings (AGMs).

The Bill consists of 6 insolvency measures and 2 corporate governance measures. It will support businesses, and where applicable charities and mutual societies, by:

  • introducing a new moratorium to give companies breathing space from their creditors while they seek a rescue
  • prohibiting termination clauses that engage on entering an insolvency procedure, entering the new moratorium or beginning the new restructuring plan procedure. It will also prevent suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process
  • introducing a new restructuring plan for companies in financial distress which include new cross class cram down procedures that allow a class of creditors to be bound by the restructuring plan even if they do not agree to the plan. This provision takes steps to provide safeguards for affected creditors in these situations
  • enabling the insolvency regime to flex to meet the demands of COVID-19
  • temporarily removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat in a COVID-19 environment
  • temporarily prohibiting creditors from filing statutory demands and winding-up petitions for COVID-19 related debts
  • temporarily giving companies and other bodies greater flexibility to hold Annual General Meetings (AGMs) and other meetings in a safe and practicable manner in response to COVID-19
  • temporarily easing burdens on businesses by extending filing deadlines at Companies House
  • allowing for some of the temporary measures to be retrospective, giving immediate support to businesses during COVID-19

Specifically regarding Annual General Meetings, the measures will allow, for a temporary period, companies and other bodies to suspend shareholders’ and members’ ability to attend meetings in person. Instead they will be able to convene meetings in a flexible way using a range of technologies. Additionally with respect to company filings, the regulations mean that for a temporary period, public and private companies and other entities will have more time to file accounts, confirmation statements and notices of certain relevant events covered by the confirmation statement with Companies House. A relevant event would include the appointment of a new director for instance.

The Department for Business, Energy and Industrial Strategy (BEIS) has published factsheets with an explanation of each of the measures included in the Bill.

The Financial Reporting Council (FRC) has also published updated questions and answers (Q&As) including guidance on best practice for AGMs. 

The Corporate Insolvency and Governance Bill received Royal Assent on 25 June and is now law.

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