Government measures in key jurisdictions 2nd edition final pages - Flipbook - Page 102
United Kingdom
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Insolvency
On 20 May 2020, the Department for Business, Energy and Industrial Strategy introduced
the Corporate Insolvency and Governance Bill to parliament. The Bill includes proposed
changes to the UK insolvency laws in order to address the unique circumstances arising
Has the
government made from the Coronavirus pandemic. Measures introduced under the Bill include:
any changes
•
Wrongful trading provisions – as we outlined in our previous briefing, the Bill will
to insolvency
temporarily relax the threat of personal liability for wrongful trading from company
legislation?
directors who continue to trade a company through the coronavirus pandemic. The
provisions set out in the Bill do not provide a blanket suspension of the wrongful
trading provisions. The provisions state that the directors will not be responsible
for any worsening of the financial position of the company or its creditors that
occurs during the period 1 March 2020 to 1 June 2020. These changes may help
boards where the company is (or was) in financial difficulties and there is significant
uncertainty regarding the businesses’ financial future. It is worth noting that the
timeframe is very limited and so, unless it is extended, will apply to a past period by
the time it becomes law.
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Whilst directors may not be liable to contribute to the extent the financial position
worsens during this period (1 March 2020 to 1 June 2020), it is important to note that
this does not apply to the period before and after the pandemic will still be able to be
reviewed and will not fall under the protections laid out in the Bill. There are likely to
be significant challenges “apportioning losses” in this manner. In addition, directors
may still be subject to action for other breaches of duties during the coronavirus
pandemic.
•
Company Moratorium – a proposed moratorium which will give struggling businesses
a 20-businesss day opportunity to consider a rescue plan, extendable by the directors
for a further 20 business days or with creditor consent up to a year. The company will
remain under the control of its directors during the moratorium, and no legal action
can be taken against a company during this period without leave of the court.
•
Restructuring Plan – the proposed legislation will introduce a Restructuring Plan,
allowing struggling companies, or their creditors or members, to propose a new
restructuring plan which will provide an alternative rescue option for companies
that are suffering financially. The plan will enable complex debt arrangements to be
restructured and will support the injection of new finance in order to support a rescue.
•
Winding Up Petitions and Statutory Demands – the Bill introduces temporary
provisions prevent aggressive creditor action against companies. The Bill proposes
that statutory demands will not be able to be used as the basis for issuing a winding
up petition against a company. This provision applies to all statutory demands served
on any company between 1 March 2020 and the later of 30 June 2020 or one month
after the Bill has come into force. The provision prevents statutory demands served in
this period from forming the basis of a winding up petition presented on or after
27 April 2020.
In addition, the Bill will also restrict winding up petitions from 27 April 2020 to 30
June 2020, unless the petitioning creditor has reasonable grounds for believing that
the coronavirus crisis has not had a “financial effect” on the company (i.e. that as
a consequence of coronavirus or for reasons relating to coronavirus, the debtor’s
financial position has worsened). These changes have not yet become law and will be
formally debated in Parliament in the coming weeks.
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Government measures in key jurisdictions
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