Rumours that a company is in the zone of insolvency may create a race to the assets, with potential creditors or interested parties commencing proceedings in an attempt to secure payment from the company before its assets are fully dissipated or tied up in the insolvency process. This can destroy the collective value in the enterprise or scupper a restructuring and result in significant duplicative costs.

The new UK legislation for companies in financial difficulty represents a fundamental shift in approach to restructuring in Europe and adds an important new tool to the UK restructuring framework. The availability of a plan proposed under the new Part 26A of the Companies Act 2006 (a “Restructuring Plan”) will undoubtedly change how many distressed companies seek to address their financial difficulties. However, until case law is developed, there will remain considerable uncertainty as to how the Restructuring Plan will work in practice.

Today, the Government published the highly anticipated Corporate Insolvency and Governance Bill (the “CIGB”).  It legislates for the landmark changes to the UK’s corporate insolvency regime and the temporary suspension of the statutory provisions on wrongful trading announced by the Business Secretary on 28 March 2020 (see Weil’s European Restructuring Watch update of 30 March 2020).