Corporate Insolvency and Governance Act 2020

UK law

United Kingdom legislation

Corporate Insolvency and Governance Act 2020Act of Parliament

Parliament of the United Kingdom

Long title| An Act 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.
Citation| 2020 c. 12
Introduced by| Alok Sharma, Secretary of State for Business, Energy and Industrial Strategy (Commons)
Lord Callanan (Lords)
Territorial extent | United Kingdom (certain provisions have restricted territorial extent England and Wales, Scotland or Northern Ireland respectively)
Dates
Royal assent| 25 June 2020
Commencement| 26 June 2020
Other legislation
Amends| Insolvency Act 1986
Companies Act 2006

Status: Current legislation

History of passage through Parliament
Records of Parliamentary debate relating to the statute from Hansard
Text of statute as originally enacted
Revised text of statute as amended

The Corporate Insolvency and Governance Act 2020 (c. 12) is an act of the Parliament of the United Kingdom relating to companies and other entities in financial difficulty, and which makes temporary changes to laws relating to the governance and regulation of companies and other entities.[1]

The bill was introduced as part of the government response to the COVID-19 pandemic in the United Kingdom and the primary intentions of the bill were to:[2]

* introduce new corporate restructuring tools to the insolvency and restructuring regime to give companies the breathing space and tools required to maximise their chance of survival
* temporarily suspend parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability for wrongful trading and to protect companies from creditor action, and
* amend Company Law and other legislation to provide companies and other bodies with temporary easements on company filing and annual general meetings

The act commenced on 26 June 2020. It was amended by Statutory Instrument on 29 September 2020, to further extend certain time periods.

## Main provisions

[edit]

### Moratoriums

[edit]

Sections 1 to 6 and Schedules 1 to 8 amended the Insolvency Act 1986 to provide for a moratorium for companies that are likely to become insolvent.[3] The moratorium would allow insolvent companies or companies that are likely to become insolvent to obtain a 20 business day period in which they could seek to restructure or seek investment without creditor actions. This period may be extended by a further 20 days. The company's affairs must be monitored by a qualified insolvency practitioner during the moratorium period.[4][5]

### Arrangement and reconstructions

[edit]

Section 7 and Schedule 9 amend the Companies Act 2006 to insert a new part into that act which will allow for companies in financial difficulty, or which are likely to encounter financial difficulties, to propose a restructuring plan which allows them to compromise certain creditors or shareholders.[6]

The restructuring plans introduced under this section are modelled to the existing scheme or arrangement provisions but with the addition of the ability to cram down across classes of creditors.[5]

### Sales to connected persons

[edit]

Certain provisions in the Insolvency Act 1986 which allowed for regulations to be made to prohibit or restrict the sale of company property by an administrator to a person connected to the company. These provisions were due to expire in May 2020 and were extended to June 2021.[7]

### Winding-up petitions

[edit]

Sections 10 and 11 and Schedules 10 and 11 provide temporary provisions to restrict statutory demands and winding up petitions issued against companies during the COVID-19 pandemic in the United Kingdom.[5] This provision will prevent such petitions being made until 30 September 2020 where the company is in financial difficulty as a result of the COVID-19 pandemic.[8]

### Wrongful trading

[edit]

Sections 12 and 13 temporarily suspend the liability for wrongful trading for company directors by assuming that any worsening of the directors are not responsible for a worsening of the financial position of a company during the pandemic. These provisions do not apply to certain financial institutions and does not relax other offences that may arise under the Insolvency Act 1986 or the general duties of directors under the Companies Act 2006.[9][10]

### Termination clauses

[edit]

Section 14 amends the Insolvency Act 1986 to prevent suppliers from terminating contracts where a company enters into insolvency proceedings, for breaches that occur prior to insolvency or make it a condition of future supplies that pre-insolvency arrears are paid. Exclusions were made from this provision where the contract would cause the supplier hardship, for certain small suppliers and a number of further exclusions were made in respect of certain entities, industries and types of supply as a new schedule to the Insolvency Act 1986.[11][12]

### Powers to amend insolvency legislation

[edit]

Sections 20 to 27 gave further powers to the Secretary for State to make regulations to amend corporate insolvency or governance legislation. The powers given were limited to changes to the conditions that must be met before insolvency, changing the way in which the insolvency procedures applies and to change the duties of periods with corporate responsibility. Such provisions may only be used where such provisions are urgent and proportionate, cannot have effect for more than 12 months and cannot be made after 30 April 2021.[13]

### Meetings and filings

[edit]

Section 37 and Schedule 14 provided for relaxations to the rules applying to requirement for companies to hold meetings during the pandemic to take account of lockdown and social distancing measures. The rules provide that shareholder meetings may be held electronically and voting at such meetings may be held electronically. The provisions apply to meetings that would otherwise be required to be held between 26 March 2020 and 30 September 2020. It also allows for companies to extend the period in which to hold an annual general meeting and an extension for the period in which public companies must file their financial statements.[14]

### Powers to change periods

[edit]

Sections 41 and 42 gave powers to the Secretary for State to curtail the temporary time provisions which apply to parts of the act or to extend such periods for up to 6 months.[15]

## Extension of certain provisions

[edit]

### Extensions made in September 2020

[edit]

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (SI 2020/1031) extended the following periods:

* In relation to the relaxations of AGM requirements, to 30 December 2020;
* In relation to the restrictions on use of statutory demands and winding up petitions, to 31 December 2020;
* In relation to modifications to the moratorium provisions and temporary moratorium clauses, to 30 March 2020; and
* In relation to the small supplier exemption from termination cause provisions, to 30 March 2021.[16]

The SI was enacted by Lord Callanan for the Department for Business, Energy and Industrial Strategy.[17]

The above extensions were subsequently modified by The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Early Termination of Certain Temporary Provisions) Regulations 2020 (SI 2020/1033) in respect of the application of the moratorium provisions. These regulation provided that, from 1 October 2020, an insolvency practitioner would no longer be able to disregard the impact of coronavirus on a company when considering whether the company is 'rescuable'.[18]

### Further extensions made in December 2020

[edit]

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020 (SI 2020/1483) was introduced to parliament on 9 December 2020 and further extended the periods above in relation to winding up petitions and the use of statutory demands to 31 March 2021.[19]

## Passage through Parliament

[edit]

The bill was introduced to the House of Commons by Alok Sharma, Secretary of State for Business, Energy and Industrial Strategy on 20 May 2020.[20] Royal Assent of the act was granted on 25 June 2020.[21]

## See also

[edit]

* UK insolvency law
* UK company law
* UK labour law
* Insolvency Act 1986
* Companies Act 2006
* COVID-19 pandemic in the United Kingdom
* COVID-19 recession

## References

[edit]

1. ^ "Overview of the Bill". Parliament of the United Kingdom. 3 June 2020.
2. ^ "Overview of the Bill". Department for Business, Energy & Industrial Strategy & The Insolvency Service. 5 June 2020.
3. ^ "Commentary on provisions of Bill: Moratorium" (PDF). Parliament of the United Kingdom.
4. ^ "Corporate Insolvency and Governance Act 2020: Clause 1".
5. ^ a b c Hillman, James; Cottee, Steven (20 May 2020). "The UK's Corporate Insolvency and Governance Bill". Pinsent Masons.
6. ^ "CORPORATE INSOLVENCY AND GOVERNANCE BILL 2020". Addleshaw Goddard. 29 May 2020.
7. ^ "Corporate Insolvency and Governance Act 2020: Section 8" (PDF).
8. ^ "Corporate Insolvency and Governance Bill: advertisement of winding up petition restrained before Bill enacted". CMS (law firm). 24 June 2020.
9. ^ Wood, Steven (25 May 2020). "Corporate Insolvency and Governance Bill – Wrongful Trading". Institute of Chartered Accountants of Scotland.
10. ^ "Corporate Insolvency and Governance Act 2020: Section 12".
11. ^ Roberts, Christopher; Green, Jared (29 May 2020). "UK Corporate Insolvency And Governance Bill: Termination Clauses In Supply Contracts". DLA Piper. Archived from the original on 28 June 2020. Retrieved 28 June 2020.
12. ^ "Corporate Insolvency and Governance Act 2020: Termination clauses in supply contracts".
13. ^ "Corporate Insolvency and Governance Act 2020: Power to amend corporate insolvency or governance legislation: Great Britain".
14. ^ Hopewell, Cliver; Gent, David (May 2020). "Corporate Insolvency and Governance Bill: UK company meetings and filings". Bird & Bird.
15. ^ "Corporate Insolvency and Governance Act 2020: Powers to change periods".
16. ^ "Explanatory Memorandum to The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020" (PDF).
17. ^ "The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020". Legislation.gov.uk. 29 September 2020. Retrieved 14 October 2020.
18. ^ "Explanatory Memorandum: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Early Termination of Certain Temporary Provisions) Regulations 2020" (PDF).
19. ^ "Explanatory Memorandum: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020" (PDF).
20. ^ "Government introduces legislation to relieve burden on businesses and support economic recovery". Gov.uk. 26 June 2020.
21. ^ "Royal Assent". House of Lands Hansard. 25 June 2020.

## External links

[edit]

* Guidance on effects of the Act – Companies House, 26 June 2020

* v
* t
* e

COVID-19 pandemic in the United Kingdom, Crown Dependencies and British Overseas Territories

* History
* Statistics
* Timeline
* 2020
* January–June
* July–December
* 2021
* January–June
* July–December
* 2022
* January–June
* July–December
* 2023
* 2024

Locations|

| United Kingdom|

* England
* London
* Northern Ireland
* Scotland
* Wales

|

Crown Dependencies|

* Guernsey
* Isle of Man
* Jersey

Overseas Territories|

* Akrotiri and Dhekelia
* Anguilla
* Bermuda
* British Indian Ocean Territory
* British Virgin Islands
* Cayman Islands
* Falkland Islands
* Gibraltar
* Montserrat
* Pitcairn Islands
* Saint Helena, Ascension and Tristan da Cunha
* Turks and Caicos Islands

Impact|

* Economy
* Cost-of-living crisis
* Education
* Exam grading controversy

| Society|

* Clap for Our Carers
* Protests
* Thank You NHS
* The 2.6 Challenge
* National Day of Reflection

|

Politics|

* Beergate
* COVID Recovery Group
* Dominic Cummings scandal
* Greensill scandal
* Impact on Brexit
* Northern Research Group
* Partygate
* Privileges Committee investigation
* Public inquiry
* Scottish COVID-19 Inquiry
* Virtual House of Commons

Science
and
healthcare|

* Antiviral Taskforce
* Cancer Monitoring Project
* COVID-19 Genomics UK Consortium
* COVID Symptom Study
* COVID passports
* RECOVERY Trial
* PANORAMIC trial
* AGILE

| Temporary hospitals|

* England
* Birmingham
* Harrogate
* London
* Manchester
* Washington
* Glasgow
* Cardiff
* Gibraltar
* Jersey

|

Testing programme|

* NHS COVID-19 app
* NHS Test and Trace (England)
* Test, Trace, Protect (Wales)
* Operation Moonshot
* Test to Release
* UK Rapid Test Consortium

Vaccination programme|

* Oxford–AstraZeneca COVID-19 vaccine
* European Commission–AstraZeneca dispute
* Vaccines Manufacturing and Innovation Centre
* Taskforce
* Parliamentary Under-Secretary of State for COVID-19 Vaccine Deployment

Legislation|

| Current|

* Public Health (Control of Disease) Act 1984
* 2020 budget
* Contingencies Fund Act 2020
* Contingencies Fund Act 2021
* Coronavirus mini-budget
* Winter Economy Plan
* Stamp Duty Land Tax (Temporary Relief) Act 2020
* Corporate Insolvency and Governance Act 2020
* Business and Planning Act 2020
* Nightingale Court
* Culture Recovery Fund
* 2021 budget

Revoked|

* Health Protection (Coronavirus) Regulations 2020
* Health Protection (Coronavirus, Business Closure) (England) Regulations 2020
* Health Protection (Coronavirus, Restrictions) (England) Regulations 2020
* COVID-19 local lockdown regulations in England
* First COVID-19 tier regulations in England
* Health Protection (Coronavirus, Restrictions) (England) (No. 4) Regulations 2020
* Coronavirus, Restrictions (All Tiers) (England) Regulations 2020
* Coronavirus, International Travel (England) Regulations 2020
* Face Coverings on Public Transport (England) Regulations 2020
* Face Coverings in a Relevant Place (England) Regulations 2020
* Coronavirus, Restrictions (Steps) (England) Regulations 2021
* Coronavirus, Restrictions (Local Authority Enforcement...) (England) Regulations 2020
* Health Protection (Coronavirus, Restrictions) (England) (No. 3) Regulations 2020
* Health Protection (Coronavirus, Restrictions) (Self-Isolation) (England) Regulations 2020
* Coronavirus, International Travel and Operator Liability (England) Regulations 2021
* Coronavirus Act 2020

Expired
or spent|

* Coronavirus, Restrictions (No. 2) (England) Regulations 2020
* Health Protection (Coronavirus, Wearing of Face Coverings) (England) Regulations 2021
* Health Protection (Coronavirus, Restrictions) (Entry to Venues and Events) (England) Regulations 2021
* Coronavirus, Restrictions (All Tiers and Self-Isolation) (England) (Amendment) Regulations 2021

Responses|

| Government|

* Coronavirus Job Retention Scheme
* Contract controversies
* Lockdown
* Eat Out to Help Out
* Everyone In
* Global Travel Taskforce
* National Tutoring Programme
* Pick for Britain
* Project Birch
* Can you look them in the eyes?
* Cabinet Secretary for Covid Recovery (Scotland)
* Pre-pandemic exercises
* Exercise Cygnus
* Coughs and sneezes spread diseases
* Catch It, Bin It, Kill It

|

Military|

* United Kingdom
* Overseas territories

Timelines|

* England
* January–June 2020
* July–December 2020
* 2021
* 2022
* Northern Ireland
* 2020
* 2021
* 2022
* Scotland
* 2020
* 2021
* 2022
* Wales
* 2020
* 2021
* 2022

Advisory
bodies|

* Imperial College COVID-19 Response Team
* Independent SAGE
* Joint Biosecurity Centre
* Joint Committee on Vaccination and Immunisation
* New and Emerging Respiratory Virus Threats Advisory Group
* Scientific Advisory Group for Emergencies

Key people|

* Kevin Fenton
* Neil Ferguson
* Matt Hancock
* Dido Harding
* Jenny Harries
* Sajid Javid
* Boris Johnson
* Wei Shen Lim
* Phil Prosser
* June Raine
* Rishi Sunak
* Maggie Throup
* Patrick Vallance
* Jonathan Van-Tam
* Chris Whitty
* Nadhim Zahawi

| England|

* Stephen Powis
* Amanda Pritchard
* Simon Stevens

|

Northern Ireland|

* Arlene Foster
* Paul Givan
* Charlotte McArdle
* Michael McBride
* Michelle O'Neill
* Robin Swann

Scotland|

* Catherine Calderwood
* Joe FitzPatrick
* Jeane Freeman
* Jason Leitch
* Gregor Smith
* Devi Sridhar
* Nicola Sturgeon
* John Swinney
* Humza Yousaf

Wales|

* Frank Atherton
* Mark Drakeford
* Vaughan Gething
* Eluned Morgan

Media
depictions|

* "Can You Hear Me" (Doctors)
* Casualty (series 35)
* Emergency State
* Failures of State
* Grayson's Art Club
* Help
* Hold Still: A Portrait of Our Nation in 2020
* Isolation Stories
* Locked Down
* Lockdown Files
* Pandemic Diaries
* Partygate
* Preventable
* Staged
* This England

See also|

* Captain Tom Moore
* Coronavirus Tech Handbook
* COVID-19 Bereaved Families for Justice
* Death of Belly Mujinga
* EveryDoctor
* Notable deaths
* London Blossom Garden
* Lineage B.1.1.7
* National Covid Memorial Wall

COVID-19 portal
*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template