In a public briefing on the 28th March 2020 the UK government announced that due to the Covid-19 pandemic they plan to introduce The Corporate Insolvency and Governance Bill. This were originally consulted in 2018, but due to the global epidemic has been fast-tracked and is now expected to be passed into law late June or early July and will be the biggest change to the UK insolvency rules for almost twenty years.
The intention is that the bill will give debtors at least forty days of protection from creditors whilst considering restructuring options. The focus of the bill is on the recovery of the company as opposed to the previous focus which was on classifying assets in order to satisfy creditor’s claims.
In order to do this it allows a director led process with an insolvency practitioner acting as a monitor in which there is a period of protection from certain creditor action. During this moratorium period the company should continue to operate normally including the settlement of any newly incurred liabilities. If at any point it is believed that rescue of the company is no longer possible then the moratorium period should be terminated.
With many companies worldwide suffering from limited trading it is a welcome break to allow time for recovery as opposed to the previous framework which would have caused a good few companies additional hardship with added liabilities such as legal costs whilst claims were dealt with ensuring a detrimental effect on recovery.