Changes to UK Insolvency Laws
On 26 June 2020, the Corporate Insolvency and Governance Act (CIG Act) came into force which introduced fundamental changes to the UK’s company and insolvency laws which not only provide temporary assistance to companies and their directors during the Coronavirus Disease 2019 (COVID-19) crisis, but on a permanent basis have significantly bolstered the UK’s restructuring tool kit. Amongst other matters, the CIG Act implements measures contained in the UK Government's consultation on Insolvency and Corporate Governance which concluded in August 2018.
In summary, the CIG Act makes certain permanent and temporary changes to the UK’s laws as follows:
• a new restructuring procedure (Restructuring Plan) that is closely based on the UK scheme of arrangement procedure (UK Scheme) but which has the ability to ‘cram-down’ entire dissenting classes of creditors and/or shareholders;
• a ban on ipso facto clauses which would otherwise permit suppliers of goods and services from terminating or varying supply to a company due to the commencement of insolvency and restructuring procedures; and
• a new moratorium procedure for companies in financial difficulty.
• a relaxation of wrongful trading rules, reducing the risk that directors will be personally liable for continuing to trade during the period 1 March 2020 through 30 September 2020 with retrospective effect;
• temporary changes to when and how creditors can present statutory demands and winding-up petitions, also with retrospective effect; and
• flexibility on requirements in relation to the holding of shareholders’ meetings and extension of time to make certain filings at Companies House.
Whilst the CIG Act ...
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