A number of key organisations from across the insolvency and restructuring framework have welcomed the passing of the Corporate Insolvency and Governance Act into law, following its Royal Assent on 26th June.
The Act is the largest change to the UK’s corporate insolvency regime in more than 20 years. It introduces new corporate restructuring tools and temporary easements to give distressed businesses the breathing space they need to get advice and seek a rescue.
One of its key provisions is the introduction of the new role of a Monitor to oversee the corporate moratorium it introduces – an extendable 20 working day period giving businesses protection from creditor action while they seek professional restructuring advice. A monitor must be a licenced insolvency practitioner and the Insolvency Service has provided guidance on their role and responsibilities. The Act also extends the suspension of termination clauses when a company enters into an insolvency procedure and introduces a new restructuring plan that has the ability to bind creditors to it.
The Act also provides temporary relief until 30th September 2020 from being subject to a winding-up petition and from wrongful trading provisions where a business can demonstrate its difficulties arise from trading conditions arising from the COVID-19 pandemic.
Insolvency and restructuring trade body R3, the Institute of Chartered Accountants in England and Wales (ICAEW), the Insolvency Practitioners’ Association (IPA), ICAS, and Chartered Accountants Ireland have all welcomed the passage of the Act on to the statute book.
The Act introduces the biggest reforms to the UK’s corporate insolvency framework for almost twenty years and makes a series of temporary changes to the corporate governance requirements for companies and other entities.
In particular, the new business rescue moratorium and new restructuring plan are designed to give companies the breathing space and tools required to maximise their chance of survival – and are measures the profession has been campaigning in favour of for a number of years.
Colin Haig, President of insolvency and restructuring trade body R3, said “Our members already play a key role in assisting struggling firms through financial difficulty, and the Act gives them additional tools with which to support this important work at a critical time for the economy. These tools now need to be tested in practice, but we are hopeful that they will prove to be successful.”
Bob Pinder, Director at the ICAEW, said “This Act contains both short-term measures and long-term reforms, and our licensed insolvency practitioners will have a key role to play as the changes take effect.”
“Our licensed insolvency practitioners are responsible professionals who are committed to helping companies restructure and survive where possible, and they will take every step necessary to ensure the legislation works in the best possible interests of all stakeholders.
“This legislation has been designed to save businesses and jobs, and we hope it’s a success.”
Michelle Thorp, CEO at the IPA, said “With Covid-19 restrictions having presented a significant challenge in many quarters of life, we welcome the Bill and its objective to support businesses. We will monitor the Bill in practice, offering input where required to help ensure that the measures serve all stakeholders in insolvency processes correctly.”
David Menzies, Director of Practice at ICAS, said “The new corporate restructuring tools and temporary suspension of parts of insolvency law are welcomed by ICAS members and will benefit many of their clients during what is likely to be a period of significant and sustained economic turmoil.”
“It is hoped the measures will fulfill government expectations and give companies the breathing space and protection required to maximise their chances of survival.”