The Corporate Insolvency and Governance Bill (CIGA), aims to give struggling businesses a formal breathing space to pursue a rescue plan, creating a moratorium during which no legal action can be taken against a company without leave of the court.
CIGA came into force on 26 June 2020 after being fast-tracked through Parliament due to the current economic crisis caused by the COVID-19 pandemic.
The key measures of the Bill are summarised below and
can be followed in our moratorium
These restrictions do not apply to Directors.
Cashflow forecasts must be produced which suggest that the company will be able to meet ongoing trading liabilities as and when they fall due (as well as the liabilities where a payment holiday does not apply), and that the company is likely to be rescued as a going concern.
The debts of the company at the date of the moratorium are pre-moratorium debts with a payment holiday. The moratorium imposes a stay on any pre-moratorium debts.
There is no payment holiday for amounts falling due in the period of the moratorium in respect of the following categories:
If a company is eligible, a moratorium may usually be initiated by completing and filing relevant documents with the court. In some cases, an application to court will need to be made by a solicitor to obtain an order for a moratorium. The moratorium will not start until the documents have been filed at court or the court order has been obtained.
The role of Monitor may only be undertaken by a licenced Insolvency Practitioner who acts as an officer of the court.
The principal duty of the Monitor is to monitor the Company’s continued adherence to the requirements of the moratorium by regularly reviewing cashflows and management accounts, and the progress made on exiting the moratorium as a going concern.
The proposed Monitor must confirm their view that it is likely that a moratorium would result in 'the rescue of the company as a going concern'. Prior to 30 September 2020 temporary relaxations and this confirmation can be qualified by using the following wording: or would do so if it were not for any worsening of the financial position of the company for reasons relating to coronavirus.
Following appointment, the Monitor is required to issue a number of notices for the attention of the Registrar of Companies, the creditors, the Pension Protection Fund and the Pensions Regulator.
A moratorium lasts 20 business days only if an extension is sought, this is for an additional 20 business days. An extension is achieved by the Directors filing the relevant documents with the court. If a moratorium is sought beyond 40 business days, the creditors will need to give their consent and a decision procedure will need to be convened to obtain creditor approval. If Directors wish to extend the moratorium for longer than 12 months, an application to court will need to be made and solicitors instructed.
Once the Company is able to be rescued as a going concern, the moratorium will no longer be required. If at any time the Directors determine the Company is no longer able to be rescued as a going concern, they must advise the Monitor who will bring the moratorium to an end. If the Monitor has not been provided with the information they require to meet their duties as Monitor, they may file the relevant documents to bring the moratorium to an end. If agreement has been obtained for a Company Voluntary Arrangement or an Arrangement or Reconstruction under the Companies Act 2006, this will bring the moratorium to an end.
For information on how we can help support your business please contact Vince Green or your usual Crowe contact.