The intention is that the Court will be able to draw on scheme of arrangement jurisprudence where appropriate. On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (“the 2020 Act”) finally entered into force. The intention of this new restructuring mechanism is to fill the gap between CVAs (which cannot bind preferential or secured creditors) and schemes of arrangement (which lack a cross-class cram down mechanism), but not to replace or impact upon either of these two procedures. However, there may be enforcement difficulties where other jurisdictions are involved. Opens in a new tab, Follow us on Instagram. All other termination rights are suspended if they relate to a breach which occurred before the start of the insolvency procedure, and were not exercised before that date. If satisfied, the Court will order that the plan is voted on by those classes at a meeting. The measures introduced by the Act … Home » The Corporate Insolvency and Governance Act: ... on the new Corporate Insolvency and Governance Act 2020 (“the Act”), we now take a closer look at the moratorium and the effects on priority between pre-existing and moratorium lenders. This has the potential to give rise to some anomalies, in particular as s233A does not apply to contracts entered into before 1 October 2015. The restructuring plan mechanism can bind all creditors, including secured creditors and junior classes of creditors even if they vote against the plan, through the use of a cross-class cram down provision. An application will be made to Court to initiate the process and at the first hearing the Court will examine the classes of creditors and shareholders as defined by the company. This means that moratorium protection is only available where there is fairly severe financial distress (although the moratorium is not intended to simply delay the inevitable insolvency of a company that has no realistic prospect of survival). Jessica Powers of New Square Chambers gives an overview of the key reforms and offers some practical advice on the new legislation. The objective of the Act is to provide the flexibility and breathing space that businesses need to continue trading, particularly during See below for a detailed outline of the new free-standing moratorium. New free-standing moratorium: further detail, Follow us on Linkedin. The Act is designed “to make provision about companies and other entities in financial difficulty; and to make temporary changes to the law relating to the governance and regulation of companies and other entities.”. The Act is designed "to make provision about companies and other entities in financial difficulty; and to make temporary changes to the law relating to the governance and regulation of companies and other entities." It introduced a new restructuring plan procedure amongst its package of permanent measures. The Insolvency Act introduces new Companies Act 2006 provisions for arrangements and reconstructions for companies in financial difficulty which allow such companies to propose a restructuring plan. The proposal must have the purpose of eliminating, reducing or preventing, or mitigating the effect of, any such financial difficulties. for a CVA, this will be when the CVA is approved, not when the CVA is proposed, and for administration, this will be when the company enters administration, rather than taking steps to appoint administrators by serving a notice of intention to appoint, for instance). The changes are introduced by the Corporate Insolvency and Governance Act 2020. Corporate Insolvency and Governance Act 2020 The Corporate Insolvency and Governance Act 2020 (the Act) entered into force on 26 June 2020. 5 Currently the period is set to end 30 March 2021 (following an extension), but subject to amendment. There is the potential that suppliers will use earlier termination trigger points to mitigate risk. The UK Corporate Insolvency and Governance Act 2020 came into force on 26 June 2020. A company will be eligible if it has been the subject of a moratorium or an insolvency procedure in the preceding 12 months (as long as it is not so subject at the filing date). Nicola Kirk. The Act introduces a number of temporary measures in response to the Covid-19 crisis, as well as new permanent reforms of the UK insolvency regime. These Explanatory Notes have been prepared by … Corporate Insolvency and Governance Act 2020 – How do the new protection of supplies of goods and services provisions work? DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help clients with their legal needs around the world. The New UK Restructuring Plan: an overview What is it? a scheme of arrangement or a restructuring plan) or otherwise enters into an insolvency procedure (e.g. 3 In addition, the Court should not make a winding-up order on the basis of a petition presented during this period unless it is satisfied that the company would be unable to pay its debts even if coronavirus had not had a financial effect on the company. Short term, the protection can also be used as breathing space for companies detrimentally affected by COVID-19 but which otherwise would remain viable. Entry into the moratorium will be triggered by filing the necessary papers at Court (a process resembling the current procedure for an out of court appointment of an administrator) unless the company is an overseas company or has a pending winding up petition, in which case there will need to be a Court hearing. The company enters into a compromise or arrangement with its creditors (e.g. This briefing was updated on 2 December 2020.The Corporate Insolvency and Governance Act 2020 (the "Act") received Royal Assent on 25 June 2020 following a fast-tracked legislative process, with the majority of provisions taking effect from 26 June 2020. The Corporate Insolvency and Governance Act 2020 was introduced on 26 June 2020. Article by. 1 The provisions apply when a company becomes the subject of the relevant insolvency procedure (e.g. May wish to consider the grant of any security must continue to be unjust or )! 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