This article highlights where the legislation, as it was introduced in the Bill, differs from the final form of the Act
In our article last month (accessible here), we discussed the Government’s proposed measures in the Corporate Insolvency and Governance Bill (the “Bill”). The Bill went through an accelerated parliamentary process, largely driven by the Government’s desire to seek to minimise the economic fallout post Covid-19. On 26th June, the Corporate Insolvency and Governance Act 2020 (the “Act”) came into force. This is the most significant piece of insolvency legislation since the Insolvency Act 1986 and includes a number of temporary and permanent measures which are designed to provide businesses with the flexibility they need to continue trading during this time. The majority of provisions commenced on the 26 June 2020, however most of the temporary measures have retrospective effect from 1 March 2020.
The relevant sections of the Act remain mostly unchanged, however in this article we highlight where the legislation, as it was introduced in the Bill, diverges from the final form of the Act.
- The main changes between the Bill and the Act are as follows:
- The temporary measures relating to wrongful trading, winding up petitions and statutory demands will remain in place for longer than had previously been envisaged. Now, instead of the measures applying for a period of one month following the introduction of the Act (as had been set out in the Bill), they will remain in place until the end of September 2020 (unless further extended).
- Lenders to a company in a moratorium procedure are prevented from accelerating that debt during the moratorium and are therefore not entitled to a super-priority position in a subsequent insolvency process.
- The Secretary of State’s powers to regulate pre-pack sales to connected persons have been reintroduced.
- Pensions Regulator and the Board of the Pension Protection Fund have been provided with rights to receive notifications and information in the moratorium and restructuring plan processes.
- There is a further measure that will enable the Secretary of State to temporarily amend corporate insolvency and governance related legislation. These powers are wide-ranging but have been slightly qualified and a new time limit of two years following Royal Assent for extensions to those powers has been imposed.
The Act has also introduced two measures to give companies greater flexibility in their corporate governance duties during the Cobid-19 pandemic:
i. Annual General Meetings due to take place between 26 March and 30 September 2020 can either be held virtually, even if the company’s articles of association do not provide for this, or can be held by way of a physical meeting attended by two individuals, with shareholders voting by proxy.
ii. Companies and other types of business registered at Companies House will now get more time to file accounts. If your company is eligible, your filing deadline will be updated automatically and you do not need to apply for an extension
These new provisions give companies increased options when dealing with distressed situations. It will be interesting to see over the coming months how these measures are used in practice.
If you have any questions about the Corporate Insolvency and Governance Act 2020 in relation to your own organisation, please contact a member of the team or speak with your usual Fox Williams contact.