“Buy land, they’re not making it any more”. Are CVAs making a mockery of Mark Twain’s advice?

“Lies, damned lies, and statistics”

How was the CIGB received?
Were there any concerns?
What has changed?
What else was proposed?
What's next?
A recap

After the Corporate Insolvency and Governance Bill (CIGB) was published on 20 May 2020, it raced through the House of Commons and House of Lords and, on 26 June 2020 (in under 6 weeks) came into force as the Corporate Insolvency and Governance Act 2020 (CIGA), with certain of the temporary measures taking effect from 1 March 2020.

How was the CIGB received?

Licensors of intellectual property rights may soon be unable to terminate licences where the licensee has gone into an insolvency process.

What are ipso facto clauses and why do they matter?

Permanent measures
Temporary measures

The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.

The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.

The proposed legislation is split into two broad categories: temporary provisions brought about as a result of COVID-19 and permanent provisions which will result in fundamental changes to UK insolvency law. The proposals, both temporary and permanent, reflect a shift towards a more debtor-friendly regime.

Building on measures already introduced in the Coronavirus Act – such as the moratorium on lease termination for non-payment of rent until 30 June 2020 – the Government announced that further emergency measures will be introduced.

Statutory demands and winding up petitions issued to commercial tenants to be temporarily voided

The forthcoming Corporate Insolvency and Governance Bill will include restrictions on the use of statutory demands and winding up petitions to recover sums owed by tenants.

Being involved with a company which is experiencing financial difficulties is clearly a stressful experience for directors. As well as having to deal with the operational consequences of the company’s distress, directors must ensure that they comply with their duties and obligations under the Companies Act 2006 (CA2006) and the Insolvency Act 1986 (IA1986). Directors of listed entities are in a particularly difficult position, as in addition to those duties they must comply with their obligations to the markets.

Directors’ duties

Amid all the usual politics of the Government’s Budget this week, one seemingly low-key change might be of considerable interest to lenders and insolvency practitioners. The Chancellor announced that from 6 April 2020 HMRC will once again benefit from a Crown preference.

The Government has announced that it will legislate to prohibit the enforcement of certain contractual termination clauses ('ipso facto clauses').

As with other aspects of the response to recent insolvency and corporate governance consultations, this has given us pause for thought.