Corporate insolvency and governance act 2020
23 October 2020
The Corporate Insolvency and Governance Act 2020 (CIGA) represents the most significant changes to UK corporate restructuring legislation in almost 20 years. Whilst key measures were subject to consultation prior to the onset of COVID-19, CIGA came rapidly into law with effect from 26 June 2020 to provide much needed support to companies and organisations through the global pandemic and beyond. BDO welcomes these changes and the powerful new measures to improve the potential for distressed companies and organisations to survive, stabilise and prosper.
In summary, the new measures include:
- New moratorium protection to give companies in financial difficulty time to properly consider turnaround options (monitored by a licensed insolvency practitioner to provide independent comfort to impacted stakeholders)
- Restrictions on the ability of suppliers to terminate certain supply contracts during the moratorium or other insolvency proceedings. A separate flyer explains the changes to so-called “ipso facto” termination clauses, contained within the summary document that you can also download below.
- A new “debtor in possession” Restructuring Plan with the ability to do a cross-class cram down, a tool not currently available under the existing Scheme of Arrangement and Company Voluntary Arrangement (CVA) procedures
- Temporary measures restricting the use of winding up petitions.
The first use of the new CIGA Restructuring Plan by Virgin Atlantic Airways Limited to implement a solvent recapitalisation has been the subject of extensive press coverage. It evidences the need for a more flexible, debtor in possession procedure.
Consistent with our Rethink strategy, the application of these reforms will require ever-increasing levels of collaboration between the adviser, directors, creditors, shareholders and other financial and non-financial stakeholders as a means of developing positive solutions in challenging circumstances.
Download our concise summary of CIGA, setting out why BDO welcomes this new legislation, the summary of major changes and the additional flexibility it provides in supporting our clients to deliver creative, value-driven solutions in challenging situations.
The loss of the ability to terminate contracts when an insolvency related event occurs is a substantial legal change. However, the Act does contain some measures intended to balance any perceived unfairness towards suppliers. Find out specifically how the Ipso Facto termination clause contained within CIGA will have an impact on the supply chain.
If you would like to discuss the practical implications and opportunities the Corporate Insolvency and Governance Act 2020 offers, we would be delighted to arrange a meeting with you to do so. Please contact a member of our team.