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20/05/2020

Bill introduced to relieve business insolvency and corporate governance issues

Subject: Coronavirus emergency legislation; Business organisations/insolvency

Source: GOV.UK; Department for Business, Energy & Industrial Strategy

The government has introduced the Corporate Insolvency and Governance Bill in Parliament. MPs in the House of Commons will next consider all stages of the Bill on Wednesday 3 June 2020. The Bill consists of 6 insolvency measures (some quite radical) and 2 corporate governance measures.

The policy objective is to maximise the chances of survival for businesses adversely affected by the COVID-19 pandemic. Many otherwise economically viable businesses are experiencing significant trading difficulties. In addition, the Government-enforced social distancing measures and reduced resources are making it hard for many businesses to continue to trade and meet their legal duties.

Insolvency measures

*             a new self-standing moratorium to give companies breathing space from their creditors while they seek a rescue;

*             prohibit termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process;

*             a new restructuring plan that will bind creditors to it enabling the insolvency regime to flex to meet the demands of the emergency;

*             temporary removal of the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency;

*             temporary prohibition on creditors filing statutory demands and winding up petitions for coronavirus related debts.

The corporate governance measures will introduce temporary easements and flexibility to businesses where they are coping with reduced resources and restrictions.

 

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