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Corporate Insolvency and Governance Bill

The much anticipated Corporate Insolvency and Governance Bill was published on the evening of 20 May 2020.  It builds on the COVID-19 related measures announced by the Business Secretary on 28 March 2020, as well as introducing other reforms that have been in prospect for rather longer.  As legislation specifically drafted to address the COVID-19 crisis it is expected to be fast tracked through parliament and become law within the next week or two.

Whilst there is scope for changes before the Bill comes into force the, current headline points are:

Temporary provisions

Part of the Bill is intended to give temporary relief to businesses affected by COVID-19.


The wrongful trading laws will be tweaked so that directors will not be required to contribute for any worsening of a company’s legal position in the period 1 March – 30 June 2020.  In practice, this is unlikely to provide much comfort to directors.  They remain potentially liable for contributions either side of this period (unless the 30 June cut off is subsequently extended).  More significantly, there is no equivalent suspension for breach of duties or misfeasance claims, which to a large degree overlap with wrongful trading and are usually brought in the same action as a wrongful trading claim.

Even in the short period since the Bill was published this provision has been subject to much criticism and, unless amended, is likely to have little practical impact.


Alok Sharma also trailed these amendments in the 28 March 2020 announcement.  However, the draft provisions are far removed from the promised protection to commercial tenants.  No provision is made at all for individuals (as opposed to companies) who are tenants of commercial premises.  Conversely, the Bill seeks to place a halt on all statutory demands served between 1 March and 30 June 20020 and winding up petitions issued between 27 April and 30 June 2020, unless the creditor can prove that the inability to pay was not as a result of COVID-19.  The provisions will apply to all companies and are not limited to commercial tenants.

How this will play out in practice remains to be seen but, as drafted, the ability of a creditor to pursue an undisputed debt will be very severely limited.  Whilst there is provision for the Court to determine that the inability to pay is not COVID-19 related, the practical and evidential hurdles for a creditor to overcome seem very challenging.


Some time extensions have already been put in place for compulsory filings at Companies House.  The Bill allows the Secretary of State to temporarily make further extensions of time.   The is also a relaxation in the requirement for companies to hold AGMs.

It builds on the COVID-19 related measures announced by the Business Secretary on 28 March 2020, as well as introducing other reforms

Permanent reforms

The remaining provisions are not directly related to COVID-19 and, if passed, will become permanent law.


Companies will be able to apply for a 20 day moratorium for protection from creditor action, which can be extended by the directors, creditor consent or court order.  The moratorium is intended to allow a breathing space for the company to put together a rescue plan.  Unlike administration, the directors will remain in day to day control of the company.  However, a licensed insolvency practitioner must act a ‘Monitor’ to confirm that it is likely that the moratorium will allow the rescue of the company as a going concern.  The Monitor must consent to certain financial transactions and can bring the moratorium to an end if they no longer believe that the company can be saved.


This will be a new process similar to a company voluntary arrangement (CVA).  As with a CVA 75% of a class of creditors can vote to accept a compromise in support of their claims, binding any dissenting minority.  However, unlike CVAs, the restructuring plan can also be used to bind secured creditors, known as ‘cross-class cram down’.  The plan must be sanctioned by the court after it is approved by creditors and is dependent on the creditors not being worse off than the alternative if the plan were not approved.


Supply contracts often contain a clause permitting termination in the event of a customer’s insolvency.  The Bill will prohibit the use of such clauses provided that the goods or services continue to be paid for, together with other protections to prevent supplier hardship.

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This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

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