On 26 June 2020 the UK Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act marked the most significant insolvency reforms in a generation – introducing new permanent restructuring tools (such as the restructuring plan and the moratorium). It also introduced two temporary measures (see our blog post here) specifically dealing with the impact of COVID-19 on companies:

The Corporate Insolvency and Governance Act 2020 (the Act) introduced significant changes to insolvency law, including permitting companies to propose a “restructuring plan”. The restructuring plan offers a flexible option for companies that sponsor defined benefit pension schemes to compromise their obligations to creditors and, potentially, to the pension scheme itself.

For most businesses, the Chancellor’s budget statement yesterday brings some welcome news with the extension of certain critical Covid-19 support measures. However, this is coupled with the removal of certain government-backed loan schemes and a future increase in the corporation tax rate from 19 per cent to 25 per cent from 2023 onwards.

Over the last 12 months, global markets have been amazingly resilient, indeed even buoyant, aided in large part by governments around Europe and the world providing seemingly unlimited funding and extensive financial stabilisation measures, such as quantitative easing.

This, coupled with protective legislation for companies to prevent insolvency filings and to ensure continued trading – for example, moratoriums, relaxations on insolvency filing obligations and restrictions on creditor actions – has given businesses significant breathing space and prevented widespread failures.

As the business world starts to count the cost of the COVID-19 pandemic and the government measures taken to contain it, attention is turning to the tools available to help companies that have been financially impacted.

Many companies are deferring payments to conserve liquidity, raising difficult questions around directors’ duties and leading to an immediate focus on how to protect the business from resulting creditor action.

The English Court of Appeal has handed down its judgment in the Debenhams case, on which we acted. A copy of the judgment can be downloaded here. This upholds the decision of the High Court, which followed the earlier decision in Carluccio’s.

In March 2020, the UK government announced that changes will be made to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.

The legislation implementing this has now been laid before Parliament in the Corporate Insolvency and Governance Bill. This includes measures intended to tide companies through the COVID-19 pandemic, as well as far-reaching wholesale reforms to the UK’s restructuring toolbox.

As widely blogged about, on 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force, introducing both far-reaching wholescale reforms to the UK’s restructuring toolbox as well as temporary measures dealing with COVID-19 impacts on companies. The two most significant temporary measures for companies facing financial difficulties as a result of the COVID 19 pandemic were:

As the coronavirus pandemic began spreading through Europe in the early months of 2020, the authorities had little idea of how best to respond – both to the virus itself, and its impact on livelihoods and businesses.

But since then, Europe’s major economies have introduced a suite of measures to contain COVID-19’s spread and keep the economic fallout from social restrictions to a minimum.

How would your business be impacted if one of your critical suppliers entered insolvency proceedings? What losses could you suffer, and how would you maintain continuity of supply?

Recent high profile collapses such as Carillion have highlighted this issue, with counterparties suffering significant disruption upon its failure. In the context of increasing financial uncertainty – not least because of Brexit – companies should take a hard look at their supply chain in order to assess and mitigate counterparty risk.