Corporate Insolvency and Governance Bill—restructuring plan provisions

Corporate Insolvency and Governance Bill—restructuring plan provisions

On 20 May 2020, the Government released details of the Corporate Insolvency and Governance Bill. We look inparticular at the provisions relating to the new restructuring plan, including which companies are eligible, cross-cram down and other voting provisions as well as the court’s involvement.

Spurred on by the coronavirus (COVID-19) pandemic, the government has released details of the Corporate Insolvency and Governance Bill. The government previously consulted on proposed changes to the UK’s insolvency regime and published its response on 26 August 2018. The current Bill is currently progressing through parliament and various provisions may be amended inthat process. The Bill largely follows the conclusions set out inthe government’s response and this News Analysis comments on the Bill as at 20 May 2020.

Among the proposed reforms, the Bill (at clause 7 and Sch 9) introduces a new Part 26A into the Companies Act 2006 (CA 2006)—Arrangements and Reconstructions for Companies inFinancial Difficulty (a ’restructuring plan’).

 



What are the practical implications?


We have already seen several corporate failures around the world linked to coronavirus. Some of the reforms proposed by the Bill have been inthe pipeline for several years, including the proposal to introduce a new tool for struggling companies—a restructuring plan. If enacted inits current form, the Bill should give many struggling companies which have viable underlying businesses the tools needed and necessary breathing space to secure a rescue.

The Bill contemplates a new restructuring procedure that would allow a company to bind all creditors, including junior classes of creditors even if they vote against the plan, through the use of a cross-class cram down provision. Such cram down could be imposed provided dissenting classes of creditors are no worse off than they would be inthe relevant alternative. The classes of creditors would be proposed by the distressed company on a case by case basis. For a class to vote infavour, 75% of a class by value, and

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.