Commercial Debt And COVID-19: Could Provisions Under The Corporate Insolvency And Governance Act 2020 Assist Your Business?

Published date27 November 2020
Subject MatterCorporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Coronavirus (COVID-19), Corporate and Company Law, Insolvency/Bankruptcy, Contracts and Commercial Law, Operational Impacts and Strategy
Law FirmShepherd and Wedderburn LLP
AuthorMr Phillip Sewell and Sarah Walker

The UK Government has introduced various provisions in order to help viable companies survive the COVID-19 pandemic. These provisions are contained within the Corporate Insolvency and Governance Act 2020 ("CIGA"), which was brought into force on 25 June 2020. Of the provisions introduced, the moratorium is key for businesses that have been impacted by COVID-19.

If eligible under CIGA, directors of a company are allowed to implement a moratorium to prevent a creditor taking any action against the company concerned. Once the moratorium is in place, the company is still controlled by the directors but their actions are assessed by a qualified insolvency practitioner (referred to as a monitor).

One of the main benefits in using the moratorium is that it allows a company a 'payment holiday' in relation to specified pre-moratorium debts. There are various ways to obtain this moratorium, but if successful it can last up to 20 business days and be extended further up to a period 12 months (with creditor consent).

Another tool introduced by CIGA for businesses during this time is the Restructuring Plan (" Plan"), which is...

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