The legislation included in the Corporate Insolvency and Governance Bill will be in force very soon. The Bill will be a significant shake up to insolvency law and is specifically designed to assist businesses to survive, protect jobs and help the economy recover. The main points of the Bill are as follows.
This is designed to provide breathing space for businesses to seek professional advice and look at strategic rescue plans. During the moratorium period no legal action will be permitted against the business without the court's permission.
Measures will prevent essential supplies from stopping supplies to a business that is going through an insolvency or restructuring process.
A new restructuring procedure will provide for a more straightforward restructuring of businesses with the right circumstances. The procedure will require the sanction of the court which will consider fairness, the interests of creditors and whether it is equitable.
Suspension of wrongful trading laws
For a period (yet to be defined) liquidators and administrators will not be able to bring actions against directors who have caused losses to creditors from continued trading. It is, however, worth noting that no other director duty has been altered or suspended and directors should continue to act in good faith. This measure was first announced on 28 March 2020 and you can read the Brailey Hicks article from 30 March here.
Statutory demands and winding up petitions
Such legal procedures will not be permitted where the debt has arisen as a result of COVID 19. It is envisaged that debtors and creditors will be encouraged to reach informal and pragmatic solutions regarding these debts.
Brailey Hicks will be monitoring the progression of the Bill into law and practice. Hopefully it will lead to more business rescues and less terminal insolvencies.
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