The Corporate Insolvency and Governance Bill 2020

Well done for reading this far. Corporate insolvency and governance are concepts that really don't get the juices flowing, except for a few lawyers and company secretaries. Possibly.

However, if you're concerned that your company may become insolvent (and who isn't struggling at the moment?) you might want to read on. And if you're involved in convening company meetings, you definitely should.

So, what does the Bill (published on 20 May 2020) have to say on these not-so-gripping subjects...

Corporate Insolvency

The majority of the Bill relates to Insolvency and is intended to “introduce greater flexibility into the insolvency regime, allowing companies breathing space to explore options for rescue whilst supplies are protected, so they can have the maximum chance of survival; [and] to temporarily suspend parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability and to protect companies from aggressive creditor action”.

Key points include:

• Moratorium - The introduction of a moratorium allowing a company in financial distress a breathing space in which to explore its rescue and restructuring options free from creditor action, perhaps facilitating a rescue of the company.
• Arrangements and reconstructions for companies in financial difficulty -Struggling companies, their creditors or members will be able to propose a new restructuring plan between the company, creditors and members.
• Winding-up petitions – Businesses will be protected from winding-up petitions by creditors in circumstances where COVID-19 has had a financial effect on the company which has caused the grounds for the proceedings.
• Wrongful trading – Measures will prevent a court from taking into account losses incurred during the period in which a business was suffering from the impact of the pandemic when assessing its directors' liabilities.
• Termination clauses in supply contracts – Termination clauses that kick-in on insolvency or are based on past breaches of contract will be prohibited. This will mean that (subject to certain exclusions) contracted suppliers will have to continue to supply even where there are pre-insolvency arrears unless they can demonstrate that this will cause them financial hardship.

Governance

Schedule 14 to the Bill relates to ‘meetings of companies and other bodies’ and provides that:

• The meeting need not be held at any particular place - This removes the need for a venue to be stated and so has the effect of removing any doubt about the legality of virtual meetings.
• The meeting may be held, and any votes may be permitted to be cast, by electronic means or any other means - This permits a wide range of options, including virtual meetings.
• The meeting may be held without any number of those participating in the meeting being together at the same place - This removes the requirement for a quorum meeting together.
• A member of the qualifying body does not have a right— (a) to attend the meeting in person, (b) to participate in the meeting other than by voting, or (c) to vote by particular means - This establishes that meetings can be held electronically and behind closed doors.

It's also worth noting that the Bill is intended to override any conflicting provision in legislation, regulation or the organisation’s own constitution, including its articles of association.

The Bill is due to complete its Parliamentary passage on 03 June 2020 but anything could happen!

For further details, take a look at the Bill and Explanatory Notes. Otherwise, sit back with your favourite beverage and chill.