Corporate Insolvency and Governance Bill—restrictions on ipso facto clauses

Corporate Insolvency and Governance Bill—restrictions on ipso facto clauses

On 20 May 2020, the government published the Corporate Insolvency and Governance Bill. This News Analysis looks at the proposed changes to ensure the continuity of essential supplies to companies subject to an insolvency or restructuring event and to restrict contractual termination provisions on insolvency (ipso facto clauses).

Spurred on by the coronavirus (COVID-19) pandemic and a desire to mitigate the effect on businesses of the government-imposed lockdown, the government has published the Corporate Insolvency and Governance Bill. The government previously consulted on proposed changes to the UK’s insolvency regime in 2016 and published its response on 26 August 2018. The current bill is progressing through parliament with its second reading tabled for 3 June 2020. The bill largely follows the conclusions set out in the government’s response and this News Analysis comments on the bill as originally published.

Among the proposed reforms, the bill introduces new provisions into the Insolvency Act 1986 (IA 1986) to ensure the continuity of essential supplies and restrict contractual termination provisions on insolvency (ipso facto clauses).

For an overview of the bill, see News Analyses: Corporate Insolvency and Governance Bill and Corporate Insolvency and Governance Bill—a view from the restructuring and insolvency profession.

For more in depth analysis of the specific proposals, see News Analyses:

What are ipso facto clauses?

When a company is subject to an insolvency procedure, creditors often seek to improve their position by threatening to terminate their supply of goods or services to the company. Creditors can do this if the contract contains a provision entitling the creditor to terminate on the grounds of insolvency or the impaired finan

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About the author:
 
Helen joined LexisPSL in 2019, prior to which she was a Professional Support Lawyer at CMS specialising in insolvency and restructuring. She has broad experience in advisory, non-contentious and contentious work, including directorsâ?? issues, formal appointments, security issues and cross border recognition and assistance. She advised on financial institution insolvency and the insolvency of professional partnerships.

Helen trained at Lovells (now Hogan Lovells), qualifying in 2008. She was previously an associate at Lawrence Graham (now Gowling WLG) as well as the commissioning editor of Corporate Rescue and Insolvency journal.