Vol 17 (2020) - Issue 4

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The Most Significant Insolvency Reforms for a Generation

Synopsis
On 28 March 2020 the UK government announced that changes would be made to enable UK companies undergoing a rescue or restructuring process to continue trading, giving them breathing space that could help them avoid insolvency. The legislation implementing this has now been passed as the Corporate Insolvency and Governance Act 2020 (the 'Act') which came into force on 26 June 2020.

This article does not cover the reforms dealing with measures required to tide companies through the COVID-19 pandemic (a suspension to liability for wrongful trading and restrictions on statutory demands and winding up petitions) but instead focusses on those 3 insolvency tools which are here to stay. The Act also revives the government's power to make regulations in relation to pre-pack administration sales to connected parties, such power to be exercised by June 2021.

The UK's insolvency framework will be supplemented by adding new restructuring tools:
– a moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
– a second 'stabilisation' tool, protection of supplies to enable companies to continue trading during a restructuring or insolvency; and
– most excitingly, a new restructuring plan, permitting for the first time under English law, cross-class cram down of creditors and shareholders.