The Corporate Insolvency and Governance Act 2020 was recently given Royal Assent, providing what could be invaluable assistance to businesses in the current climate of difficult trading.
Included in the bill are a number of new corporate restructuring options as well as temporary changes to insolvency law that have been announced by the government since the onset of the COVID-19 pandemic.
Notably, the bill introduces a new standalone moratorium option for companies that are insolvent or likely to become insolvent. The moratorium restricts creditors from taking steps to recover debts and/or enforce security for a minimum period of 20 days. The company can trade under the control of its directors, overseen by an insolvency practitioner, while a turnaround strategy is being implemented. If additional time is required after the 15th day of the period starting, an extension of 20 days is allowable without the approval of creditors. Any further extension to the 40-day moratorium requires creditor approval.
Paul Newbold, partner at Torgersens said, ‘This new bill offers real help to companies that would be trading profitably had it not been for the pandemic. The moratorium offers a breathing space for company directors to work on a recovery plan without the immediate worry of creditors knocking at their door.’
For further information, please see the GOV.UK website which has a number of factsheets about the bill, including an overview and more details about the moratorium.
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