On 26 June the long-awaited Corporate Insolvency and Governance Act 2020 came into force and introduced emergency measures to provide protection to directors of companies which continue to trade notwithstanding the threat of insolvency, and to prevent, where possible, companies entering into insolvency due to COVID-19.

On 26 June, the long-awaited Corporate Insolvency and Governance Act 2020 became law providing the UK (but with separate provisions for Northern Ireland) with temporary and permanent changes to insolvency law aimed at helping businesses manage the economic implications of COVID-19 including:

Permanent measures

As set out in the first blog in this series, the Corporate Insolvency and Governance Bill (the “Bill”) introduces a new debtor-in-possession moratorium to give companies breathing space in order to try to rescue the company as a going concern.

As set out in the first blog in this series, the Corporate Insolvency and Governance Bill (the “Bill”) introduces a new debtor-in-possession moratorium to give companies breathing space in order to try to rescue the company as a going concern.

On 20 May 2020, the UK Government introduced the Corporate Insolvency and Governance Bill (the “Bill”) to the House of Commons. The Bill introduces 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 is currently only in draft form and therefore amendments may be made. It is anticipated that the legislation will come into force by the end of June 2020.

This blog (the first in a series of blogs about this new measure) outlines the key provisions of the moratorium and how it will work.

On 20 May, Parliament had its first reading of the Bill, a detailed document containing all the expected provisions applying across England, Wales and Scotland, and with separate (but substantially similar) provisions for Northern Ireland.

MPs will next consider all stages of the Bill on 3 June 2020 and it is anticipated that this will be fast-tracked to become law in July.

The UK Government published the Corporate Governance and Insolvency Bill on 20 May 2020. The legislation will be fast tracked and include both temporary and permanent changes to the UK insolvency legislation.

The temporary measures, aimed at supporting businesses struggling with cash flow and facing distress due to COVID-19, include prohibitions on presentation of winding up petitions and winding up orders, suspension of wrongful trading laws and the ability to apply for a moratorium.

It is not entirely clear how the UK Coronavirus Job Retention Scheme operates in line with current UK insolvency legislation, although it is clear that administrators can use the scheme and furlough employees.

What should you do if another business (i.e. a supplier, customer or other contract counterparty) is suffering distress and may be considering filing for insolvency?

This alert provides several “do’s” and “don’ts” to consider before and after insolvency and advises taking a proactive approach to dealing with distressed customers.

Our recent blog discussed the decision in Re Carluccio’s Limited (in administration) [2020] EWHC 88D (Ch) where the Court considered whether administrators would “adopt” the employment contracts of employees they furloughed after the 14 day grace period.