The new Corporate Insolvency and Governance Act 2020 (the Act) entered into force on 26 June 2020, having been fast-tracked through Parliament.

The aim of the Act is to relieve the burden on businesses during the COVID-19 pandemic to allow them to channel their efforts on continuing to operate and ensure their survival. The Act aims to achieve this by:

  • introducing temporary relaxing of filing requirements and Annual General Meetings (AGMs);
  • introducing new corporate restructuring tools to provide companies with additional flexibility and time to maximise their chances of survival; and
  • temporarily suspending parts of insolvency law to support directors.

In this guide, we explore the key provisions of the Act and how it aims to aid businesses through this period of economic uncertainty:

1. Company moratorium

The moratorium will give directors of insolvent or struggling companies a period of 20 business days to restructure or seek new investment free from creditor action. The initial period may be extended for a further 20 business days by the directors, or for up to a year with creditor consent.

The process will be overseen by an insolvency practitioner, acting as a monitor; however, the company will remain under the day to day control of its directors. During the moratorium, no legal action can be taken against the company without leave of the court.

Companies are eligible to use the moratorium if they are, or are likely to become, unable to pay their debts and the monitor believes that a moratorium would result in the rescue of the company. Companies are then able to enter into the moratorium by filing relevant documents at court.

2. Restructuring plan

The restructuring plan will closely resemble the existing 'Scheme of Arrangement'. It will allow struggling companies, or their creditors or members, to propose alternative rescue options, including complex debt arrangements or new rescue finance.

The restructuring plan will introduce a provision known as a 'cross-class cramdown' which allows a company to bind a class of creditors to the plan (even where some classes of creditors have voted against it) if the plan is sanctioned by the court as fair and equitable. Those creditors would be no worse off than if the company entered an alternative insolvency procedure.

3. Temporary restrictions on winding-up

The Act temporarily removes the threat of winding up proceedings and statutory demands presented during 1 March 2020 until 30 September 2020 where the unpaid debt is as a result of Covid-19. Creditors who wish to present a winding-up order during this period would need to have reasonable grounds for believing that coronavirus has not had an economic effect on the debtor, or the debtor would have been unable to pay its debts even if Covid-19 had not had a financial effect.

In the event of a winding-up petition that was presented on or after 27 April 2020, but before the Act came into force, and such petition would not satisfy the above grounds, the court may make such order as it thinks appropriate to restore the position to what it would have been if the petition had not been presented, i.e. winding-up orders made on or after 27 April 2020 but before the Act came into force that does not satisfy the requirements of the Act may be deemed void.

4. Temporary suspension of wrongful trading liability

The Act introduces temporary changes to the current wrongful trading provisions to reduce the threat of personal liability of company directors as they use their best endeavours to continue trading during the pandemic. The Act does not introduce a blanket suspension on wrongful trading provisions.

The changes are backdated to 1 March 2020 and will come to an end on 30 September 2020. When determining the liability of a director for wrongful trading, the court is to assume that the director is not responsible for any worsening of the financial position of the company or its creditors that occurs during this period. Existing laws for fraudulent trading and the threat of director disqualification will continue to apply.

5. Prohibition on termination clauses in supply contracts

The Act introduces a permanent change to the use of termination clauses in supply contracts. With the exception of small company suppliers, where a company has entered an insolvency or restructuring procedure or obtains a moratorium during this period of crisis, suppliers will be unable to rely on contractual terms to stop supplying or vary the contract terms with the company, for example increasing the price of supplies. The customer will remain required to pay for any supplies made once the insolvency process has commenced but is not required to pay outstanding amounts due for past supplies while it is arranging its rescue plan. Should a supplier consider that the obligation to continue to supply is causing it hardship, then they will be able to apply to the court for permission to terminate the contract.

Also, if the supplier had the right to terminate the contract or supply prior to the company entering the insolvency procedure but failed to do so, the right to terminate is suspended during the insolvency period.

6. Temporary changes to holding AGMs and general meetings (GMs)

The Act temporarily allows companies that are under a legal duty to hold an AGM or GM to hold a meeting by other means (even if their constitution would not normally allow it), for example, a virtual meeting or one that complies with social distancing measures and therefore removes the members' right to attend a general meeting in person.  The provisions apply to meetings held between 26 March 2020 and 30 September 2020.

The Act also provides that companies and other bodies whose deadline to hold an AGM expires between 26 March 2020 and 30 September 2020 are given until 30 September to hold their AGM.

The measures apply retrospectively from 26 March 2020, so any company that has already held an AGM while adhering to social distancing measures, but that as a result did not meet relevant obligations in its constitution, will have done so in accordance with the law.

7. Extensions to some Companies House filing requirements

The Act enables the Secretary of State to make regulations to extend deadlines for three types of filing: accounts; confirmation statements and registrations of charges. 

8. Impact on the commercial property market and restriction of CRAR

The Act implements the measures announced by the UK government to safeguard against aggressive rent collection tactics which may be utilised by some landlords during the pandemic and follows the suspension of the right to forfeiture for non-payment of rent contained in the Coronavirus Act 2020. The Act temporarily restricts the right for landlords to collect unpaid rents through service of statutory demands and presentation of winding-up petitions.

Also, through the Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020, landlords are prevented from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent. Previously, landlords must be owed just seven days of rent before they can take steps to recover the unpaid debt through CRAR. This new legislation will, therefore, afford struggling tenants with additional flexibility during the period of economic uncertainty.


The Corporate Insolvency and Governance Act 2020 has introduced the most extensive changes to UK insolvency law for 20 years. The changes aim to not only offer a lifeline to businesses suffering from the financial impact of the COVID-19 pandemic but also introduce permanent changes to the current support available to struggling companies and greater flexibility into the UK insolvency regime.  Businesses must familiarise themselves with the changes contained within the Act to utilise its provisions during this period of uncertainty fully.


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