According to the Eastern branch of the insolvency and restructuring trade body R3, the Corporate Insolvency and Governance Act 2020, which passed into law on Thursday (25/6/20), is a huge step forward in navigating the enormous economic damage caused by COVID-19.
In addition to temporary easements on reporting requirements for private and public limited companies, the Act includes new corporate restructuring tools aimed at maximising business rescue, as well as the temporary suspension of parts of insolvency law.
R3 Eastern Chair Alistair Bacon, of AMB Law in Ipswich, said: “The measures contained in the Act come not a moment too soon and will add to the options available to insolvency and restructuring professionals focused on rescuing businesses and supporting long-term corporate survival.”
The new Act introduces a moratorium which will give struggling companies a 20 business day opportunity to consider a rescue plan, extendable to 40 business days, with further extensions at the agreement of creditors or the court.
Further measures include temporary changes to wrongful trading provisions, which will enable businesses to continue to operate without the threat of personal liability to directors. Certain written threats from creditors and winding up petitions against companies struggling financially due to the coronavirus have also been suspended.
Alistair Bacon continued: “This legislation could give both solvent and insolvent businesses crucial breathing space and increased legislative flexibility to review options without being pushed prematurely into an insolvency procedure. This new approach could make a significant contribution to repairing the economic devastation caused by the current pandemic.”