KPMG in the UK are pleased to have supported the industry consultation into the most significant changes to insolvency legislation in almost 20 years, which came into effect on 26 June 2020.
The Corporate Insolvency and Governance Act 2020 (“the Act”) introduces major new measures aimed at reinforcing the rescue culture during this period of economic uncertainty. These changes will provide crucial support to the country’s economic recovery.
The measures being introduced include:
- A new moratorium for companies in financial distress to give them breathing space whilst they seek a solution to their difficulties. A key aspect of the moratorium is the appointment of a licenced insolvency practitioner as monitor to protect the interests of creditors including considering whether a rescue of the company as a going concern is likely;
- Measures providing for the continuation of supply to companies in the moratorium or subject to insolvency proceedings (so-called ipso facto regime), extending the current regulations around continuation of essential supplies;
- A new restructuring plan which provides a simplified voting structure (as compared to schemes of arrangement) as well as cross class cram down; and
- Temporary measures include the removal of the threat of winding up petitions and wrongful trading liability for directors (until at least 30 September 2020) to give companies crucial respite as they deal with the impact of COVID-19.
KPMG has been involved in a number of Company Voluntary Arrangements (CVAs) across a range of sectors. We note that CVAs are recognised in the Act as an effective tool supporting the UK’s rescue regime and the wider economic recovery.
Further information regarding the changes is now available at the Government's website. Otherwise, feel free to contact our experienced Restructuring team if you have any queries regarding the changes.