Stronachs Logo

Restructuring and Insolvency

The Corporate Insolvency and Governance Act 2020 (“the Act”) came into force on 26 June 2020. The main objective of the Act was to amend insolvency and company law in order to support companies through the coronavirus pandemic.

The Act introduced a mix of permanent and temporary changes to the restructuring, insolvency and corporate governance regime in the UK.  The permanent changes, the moratorium and restructuring plans, focus on an effort to encourage the restructuring of companies in the hope that they can be rescued. Whereas the temporary measures are a form of crisis control introduced in order to try and curb the immediate impact of the pandemic by restricting debt recovery tools during what was seen at that point as the critical time for companies suffering as a direct result of the constraints on business. 

As readers of our series on the Corporate Insolvency and Governance Act 2020 (CIGA 2020) will be well aware, CIGA 2020 was passed in June and included a number of new measures intended to provide protection to business affected by the COVID-19 pandemic. The various measures have been addressed in detail in our series of articles (which can be accessed here).

On 24 September 2020, the UK Government announced that a number of the measures, which were due to expire on 30 September 2020, will now be extended:

Our Restructuring and Insolvency Team are looking at the potential impact of the Corporate Insolvency and Governance Act 2020.  This article looks at the temporary restriction on lodging winding-up petitions.

The stated intention of the Act is to assist in the recovery of businesses which are suffering as a result of the coronavirus pandemic. The measures introduced by the Act are a combination of permanent changes to insolvency and corporate governance law in the UK and temporary provisions to assist with the short term recovery of viable businesses.  Section 10 and Schedule 10 (section 11 and Schedule 11 for Northern Ireland) of the Act set out the temporary measures introduced to restrict the presentation of winding up petitions at this time.

Our Restructuring and Insolvency Team are looking at the potential impact of the Corporate Insolvency and Governance Act 2020.  This article looks at the restructuring plan introduced by the Act.

As discussed in our previous article on the moratorium procedure, insolvency law in the UK is largely built on a system of creditor-led procedure with creditors having the power to instigate the insolvency process and to approve procedures proposed by the company or its directors. However, the Act seeks to introduce new measures that are driven by the debtor company rather than its creditors. In addition to the moratorium the Act introduces a new procedure for arrangements and the reconstruction of companies in financial difficulty. These measures are referred to as ‘Restructuring Plans’ and are akin to a Scheme of Arrangement under Part 26 of the Companies Act 2006.

Our Restructuring and Insolvency Team have been looking at the potential impact of the Corporate Insolvency and Governance Act 2020.  This article looks at the temporary provisions introduced in relation to statutory demands for payment.

What is a statutory demand for payment?

A statutory demand for payment sent to a company is a formal written warning issued by a creditor to a debtor stating that if payment is not made within 21 days a petition to wind the company up and appoint a liquidator may be presented to court.

Throughout June, the Firm’s Restructuring and Insolvency Team are reviewing the potential impact of the Corporate Insolvency and Governance Act. So far we have looked in detail at some of the new tools which are to be introduced to allow struggling businesses more breathing space to pursue a rescue plan. The Act also addresses other more practical issues which UK companies have faced throughout the COVID-19 pandemic by providing certain temporary relaxations to the legal requirements to hold meetings or file documents with Companies House on time.

Throughout June, the Firm’s Re-structuring and Insolvency Team are reviewing the potential impact of the Corporate Insolvency and Governance Bill.  Introduced in the House of Commons on 20 May 2020, the Bill offers struggling businesses a formal breathing space to pursue a rescue plan.

In our article entitled The Corporate Insolvency and Governance Bill - Moratorium Process, we reviewed the process whereby Company Directors can apply for a moratorium to prevent creditors from taking legal action against the company for a set period of time. 

This latest article in our series on the Corporate Insolvency and Governance Bill relates to the already well-publicised relaxation of liability for ‘wrongful trading’. For those less familiar with the concept of wrongful trading we have set out a summary herein so that the relaxation is given its context. For those already familiar with the wrongful trading rules, they may consider skipping ahead to the analysis later in this article.

Chambers Leading Firm 2020 bw

Contact Info

ABERDEEN OFFICE
28 Albyn Place, Aberdeen AB10 1YL
Tel: +44 1224 845845

 

INVERNESS OFFICE
Camas House, Fairways Business Park,
Inverness IV2 6AA
Tel: + 44 1463 713225

Legal 500uk leading firm 2020