The ongoing COVID-19 pandemic has profoundly reshaped the global business landscape. Some companies that only months ago seemed unstoppably profitable have been brought to an existential brink by extended lockdowns, supply chain failures, and other obstacles caused by the pandemic. Other companies who have experienced less disruption (or in some cases windfalls) stand at the threshold of opportunity even as they prepare themselves for the challenges of the 'new normal'.
On 25 June 2020 the Corporate Insolvency and Governance Act (the Act) received Royal Assent. The Act makes both temporary and permanent changes to the UK insolvency laws.
As part of these measures, a new restructuring plan (RP) has been inserted into existing legislation to enable companies to enter into an arrangement with their creditors. The RP (similar to a scheme of arrangement) will, if approved by the court, enable companies to bind all creditors (including potentially both secured and other dissenting creditors) by "cramming down" their debts.
The government has introduced the Corporate Insolvency and Governance Bill in Parliament, which will put in place a series of measures. This includes temporarily removing the threat of personal The liability for wrongful trading from directors trying to keep their companies afloat through the emergency.
In May, we reported (please refer to our previous alert available here) that the UK Government's much anticipated reforms to UK insolvency law were introduced in Parliament when the Corporate Insolvency and Governance Bill 2020 (the "Bill") started its passage in the House of Commons on 20 May 2020.
The Corporate Insolvency and Governance Bill (the “Bill”) was published on 20 May 2020 and introduced a new debtor-in-possession moratorium to give companies breathing space in order to try to rescue the company as a going concern. The Bill went through the House of Commons on 3 June and passed through the House of Lords on 23 June. The Bill was back before the House of Commons today and is likely to receive Royal Assent next week (at which point the Bill will become law).
We reported in our previous blog published on 15 June 2020 (“The Corporate Insolvency and Governance Bill – a pensions perspective”) that a number of pensions concerns had been raised about the Corporate Insolvency and Governance Bill (the Bill). As a result, the Bill was subject to significant amendment and debate from a pensions perspective in the House of Lords.
Two of the classic self-help remedies open to landlords for recovering commercial rent arrears have traditionally been forfeiture and Commercial Rent Arrears Recovery (CRAR), but both of these have been restricted as a result of Government measures to support tenants during the coronavirus crisis. There is also a proposed ban on winding-up petitions for coronavirus-related debts, which is already being applied by the courts.
Amended CRAR Regulations
As most global markets attempt a return to normal (or a new form of normal) business, it is hard to imagine a sector or an industry that isn’t already reeling from the effects of the past three months. Getting back on your feet is hard enough in the current environment, without having to worry about further setbacks impacting your business. But how would you react if your key supplier called tomorrow to let you know that they were insolvent and unable to provide you with goods or services?
The Corporate Insolvency and Governance Bill (the Bill) is being accelerated through Parliament and will soon become the Corporate Insolvency and Governance Act 2020 (the Act).
The Act, intended to give extra support to companies in financial difficulty, is likely to come into effect during July 2020. An overview of the Act can be found in our previous article.