Corporate Insolvency and Governance Bill 2020

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10 June, 2020

Michael Chambers
Partner and Head of Department

The government is seeking to provide support to companies that may be facing financial difficulties by introducing new measures designed to maximise chance of survival. The Bill will temporarily suspend parts of insolvency law and amend Company Law and other legislation to relax rules around company filing and annual general meetings.

The Bill will include:

  • The introduction of a new moratorium
  • Prohibition of termination clauses invoked on entering an insolvency process
  • A new restructuring plan
  • Flexibility to meet the demands of Covid-19 crisis
  • Temporary removal of threat of personal liability for wrongful trading
  • Prohibit filing of winding-up petition for COVID-19 related debts
  • Flexibility on holding AGMs and other meetings in a safe and practical manor in line with pandemic guidelines
  • Temporary easing of hard deadlines for filing at Companies House by allowing extensions
  • Retrospective application of some temporary measures in order to give immediate support to businesses during the pandemic

The government are seeking to include changes as per the previous consultation in August 2018 along with temporary measures designed to support companies trading through the pandemic. We will look at some of the measures in more detail below.

The Moratorium

The new moratorium outside of a formal insolvency process gives companies the opportunity to explore options to improve their chances of survival.

Exclusions that apply arise from whether the company has been subject to any formal insolvency proceedings within the 12 months prior to the filing date.

Providing the company is eligible, the directors are able to obtain a moratorium by filing relevant documents at court. If the filing takes place prior to 30 June 2020 (or one month following the bill coming in to force), it can be filed regardless of whether there is an outstanding winding up petition outstanding. In 'normal' circumstances it is likely that any company seeking a moratorium where there is an outstanding winding up petition would need to seek permission of the court by way of an application.

Included within the documents to be filed at court would be a statement from the directors confirming that they believe it is likely that the company is or is likely to become unable to pay its debt. The 'monitor' (a suitably qualified person) would also file a statement to confirm that they consent to act as monitor, the company is eligible and they believe that by entering the moratorium the company will survive as a going concern.

The moratorium will last for a period of 20 working days from the date it is filed at court, it can be extended for a further 20 business days provided the directors are able to confirm that all moratorium debts have or will be met. Any further extensions are possible with pre-moratorium creditor consent to a maximum of a year. If the extension of the moratorium is granted by order of the court, there is no maximum duration.

Save for insolvency proceedings initiated by the directors on notice to the monitor, no insolvency proceedings can be brought against the company during the moratorium period. Unless a creditor obtains leave of the court, there can be no enforcement of a security or repossession of company possessions whilst the moratorium is in place. Further, a landlord cannot exercise a right of forfeiture by peaceable re-entry.

Suspension of wrongful trading liability

One of the ways in which the Bill seeks to bring about a temporary change to the way in which the Insolvency Act 1986 is applied, the Bill does not seek to amend sections 214 or 246ZB - however, it will change the way in which those sections are applied during the 'relevant period' (1 March to 30 June 2020 / or one month after the Bill is passed).

When considering any potential liability, the court is to assume that the person is not responsible for any worsening of the financial position of the company or its creditors during the relevant period. Here, there is no requirement for the financial position to be worsened as a result of COVID 19, it appears to be reliant on the timing.

Directors remain responsible to the company and its creditors to act in their best interests or the company is likely to become insolvent or is insolvent.

Prohibition of winding-up petitions and statutory demands

Provisions within the Bill will prohibit a winding up petition being presented against a company on grounds that it is unable to pay its debts, the petitioner may be able to present a petition if it believes that the reason for the inability to pay is not related to COVID-19. In granting a winding-up order, courts will similarly need to have regard to whether the order would have been made if COVID-19 had not had direct financial effect on the company.

The provisions also apply to statutory demands served between 1 March 2020 and 30 June 2020 (or one month after the Bill comes into force), demands served during this period will not be able to be relied upon to form the basis of a petition presented after 27 April 2020.

The commencement date of a winding-up order based on petitions presented between 27 April and 30 June 2020 (or one month after the Bill comes into force) will be the date of the order and not the date of the petition, one of the significant effects of this is that any disposition of property after the date of the petition will not be automatically void.

For further information on the remaining changes to be brought about by the Bill please join Pauline Rigby, Head of Corporate and Michael Chambers, Head of Dispute Resolution at their CIGB webinar published on Tuesday 30 June 2020 where we will be happy to answer your questions. For information on this event please email

For more information contact Michael Chambers in our Business Dispute Resolution department via email or phone on 0333 207 0740. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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