The Corporate Insolvency and Governance Act 2020 is far-reaching with its implications extending to pension schemes. Pension scheme employers and trustees should ensure that they are familiar with the provisions of the Act, and the potential impact that they could have on schemes, employers and savers.

Introduction

The Act received royal assent on Thursday 25 June. The Act passed through Parliament very quickly, so that its provisions can be used by companies experiencing financial difficulty as a result of the COVID-19 pandemic. The Act contains:

On 25 June 2020, the Corporate Insolvency and Governance Bill (the “Bill”) received Royal Assent and on 26 June 2020 CIGA came into force. The restructuring team in Mayer Brown’s London office has previously commented on the different elements of the Bill in a series of blog posts and podcasts.

The Office of the Director of Corporate Enforcement (ODCE) has provided guidance on its approach to directors of companies, made insolvent by the COVID-19 pandemic, who act in good faith on objective evidence in trying to rebuild their businesses.

The issue

The consequences of the COVID-19 crisis have made many businesses that were solvent, and will likely become solvent again, technically insolvent.

Notwithstanding the phased return to some level of normality, some businesses will continue to be significantly affected, particularly those in the hospitality sector where longer term challenges may be encountered due to social distancing requirements, consumer unease and the likely absence of international travel for many months, or perhaps even longer.

The Corporate Insolvency and Governance Bill 2020 (the “Bill“) introduces a flexible restructuring compromise or arrangement for companies in financial difficulty (the “Restructuring Plan“). It is proposed that the legislation governing the Restructuring Plan will sit alongside the schemes of arrangement and be included in a new Part 26A to the Companies Act 2006.

The Restructuring Plan will not apply to companies that are solvent with no risk of insolvency; rather it will only apply where two conditions are satisfied:

A winding-up petition is one of the most critical pieces in a creditor’s armoury where a debt remains unpaid. However, in these challenging times, the government clearly wants to provide a temporary shield to companies who are unable to pay their debts due to COVID-19.

While those in the restructuring and insolvency profession have been attempting to predict what the temporary suspension of the wrongful trading provisions proposed by the government might look like, the Corporate Insolvency & Governance Bill (the “Bill”) is not quite as anticipated.

COVID-19 is an unexpected shock for many businesses. Some businesses are being significantly affected, particularly those in the travel and hospitality sectors. We consider some of the options open to otherwise good businesses facing cash-flow and other financial issues as a result of COVID-19.

How are governments dealing with COVID-19

We consider one case illustrating the efficiency of international insolvency proceedings commenced in Ireland, improvements to the efficiency of the appellate courts and one imminent legislative change, which will impose an administrative burden on the holders of security over book debts.

Ireland as an efficient venue for international insolvency

Less than an hour after an oxygen tank exploded on Apollo 13, mission control told the crew to isolate a small tank, containing 3.9 pounds of oxygen.^[1] Days later, that tank provided the oxygen to keep the crew alive while landing back on Earth.

If they had left that tank for even another hour the oxygen in it would have been almost gone.