After the Corporate Insolvency and Governance Bill (CIGB) was published on 20 May 2020, it raced through the House of Commons and House of Lords and, on 26 June 2020 (in under 6 weeks) came into force as the Corporate Insolvency and Governance Act 2020 (CIGA), with certain of the temporary measures taking effect from 1 March 2020.
How was the CIGB received?
Response from the restructuring and insolvency industry was overwhelmingly positive. Even those who raised concerns with some of the detail of the proposals, couched those points in the language of support for the purpose and nature of the proposals themselves.
Were there any concerns?
As well as issues raised by the industry in relation to the drafting of some of the provisions, a number of concerns were raised by the House of Lords Select Committee on the Constitution in their report on the CIGB in which it noted that "The need for an urgent response to COVID-19 does not justify Parliament neglecting its duty to consider the constitutional implications of the legislation presented to it".
In particular concerns were raised with regard to: (i) the retrospective nature of a number of the temporary COVID-19 measures (such as the provisions regarding wrongful trading and statutory demands/winding up petitions) and (ii) the fast-tracking of the permanent measures in the CIGB which it considered was "inappropriate", constrained Parliamentary scrutiny and could lead to poor legislation.
In its response, however, the Government gave those concerns fairly short shrift and the only concessions made as a result related to the ability of the Secretary of State to extend temporary provisions or bring in further amendments to the legislation.
What has changed?
As noted, the vast majority of amendments tabled during the passage through Parliament were rejected by Government. Those that did make it into the Act include:
- Rectifying the inadvertent drafting that would have resulted in lenders who accelerated their debt during the standalone moratorium receiving super priority status to the extent an administration or liquidation was commenced within 12 weeks of the end of the moratorium
- Extending the temporary measures from 1 month after enactment (which would have been 26 July 2020) to 30 September 2020
- Reviving a previously lapsed provision which allows for further regulations to be made prohibiting or controlling pre-pack administration sales to connected parties
- Entitling the Pensions Regulator and the PPF to receive notifications during a moratorium as if they were creditors and giving them standing to challenge director or monitor conduct.
What else was proposed?
A wide range of amendments were tabled both in the House of Commons and in particular by the House of Lords, however, very few made it into the final legislation. Some that were proposed and rejected include:
- Converting the permanent measures to temporary such that they would also expire one month following enactment (to allow for proper scrutiny of the draft legislation)
- Reducing the moratorium threshold from requiring the monitor to confirm that "it is likely that a moratorium for the company would result in the rescue of the company as a going concern" to confirming that it "could" result in a rescue as a going concern
- Removing the exclusion from access to the moratorium for companies which have participated in capital market arrangements with a value of over £10 million
- Increasing the role of trade unions in the restructuring process.
It will be interesting to see how quickly these new provisions are utilised. The existing toolkit of measures has served the restructuring industry well for almost two decades, and the new tools are entirely untested. However, the sooner these become an integrated part of the restructuring landscape in the UK, the better.
By way of reminder, the CIGA introduces both permanent and temporary amendments to the current UK insolvency regime. The temporary measures in particular are designed to address issues arising as a result of the COVID-19 pandemic and our previous article discusses these here.