The UK government introduced the Corporate Insolvency and Governance Bill (CIGB) to Parliament on 20 May 2020. As well as including temporary measures to help support businesses affected by COVID-19, it proposes significant permanent changes to UK insolvency law. These proposed permanent changes include a new company moratorium: a mechanism to give a company in financial difficulty a temporary breathing space against creditor action, during which the directors remain in control, but overseen by a monitor.

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.

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.

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.

On 28 March 2020 the UK government announced that emergency measures will be implemented 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.

The proposed measures are as follows:

Key Points

• A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.

• Sale by auction is often appropriate where an asset is difficult to value.

• Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.

The Facts

Investors may, for reasons outside of their control, find themselves with a financially distressed company in their portfolio and possibly in unfamiliar territory. Consequently, it is not just those investors who actively seek out opportunities within the distressed space who should be mindful of the implications of insolvency processes (most commonly administration which can often also be used as part of a wider restructuring).

Key points

• Failure to comply with sections 333 and 363 of the Insolvency Act constitutes contempt of court for which a committal order may be obtained.

• A trustee in bankruptcy should not usually require permission to apply for a committal order.

• Correct procedure for application confirmed by the court.

Key points

• Information obtained by compulsion can be shared between officeholders of connected estates (parent/subsidiary)

• There must, however, be a possibility that there will be a surplus in the subsidiary estate

• The prospect must be real as opposed to fanciful

The facts

Key points

• Court reiterated circumstances in which it will sanction a proposed course of action by administrators

• Requirement that the course of action be “particularly momentous”

• Court sanctioned proposed settlement in the circumstances

The Facts