Corporate Insolvency and Governance Act 2020—impact on CVAs

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Corporate Insolvency and Governance Act 2020—impact on CVAs
  • What are the practical implications?
  • Small company CVA moratorium
  • Interaction between new moratorium and CVAs
  • Order of payments
  • Protection of supplies
  • Will the new moratorium and restructuring plan tools render CVAs obsolete?
  • Useful links

Corporate Insolvency and Governance Act 2020—impact on CVAs

On 26 June 2020, the Corporate Insolvency and Governance Act 2020 (CIGA 2020) came into force, see News Analysis: Corporate Insolvency and Governance Act 2020. The government previously consulted on proposed changes to the UK’s insolvency regime and published its response on 26 August 2018, see News Analysis: Exploring the government’s response to the insolvency and corporate governance consultation. CIGA 2020 largely follows the conclusions set out in the government’s response.

Among the proposed reforms, CIGA 2020 (at Schedule 3, para 2) repeals the moratorium for small companies in a CVA in light of the plans to introduce a new standalone moratorium procedure, see Practice Notes: Corporate Insolvency and Governance Act 2020—moratorium and Corporate Insolvency and Governance Act 2020—moratorium extension and termination.

What are the practical implications?

We have already seen several corporate failures around the world linked to coronavirus (COVID-19). Some of the reforms implemented by CIGA 2020 have been in the pipeline for several years, including the new tool for struggling companies: a restructuring plan (see Practice Note: Corporate Insolvency and Governance Act 2020—restructuring plan provisions) plus a standalone moratorium. CIGA 2020 should give many struggling companies which have viable underlying businesses the tools needed and necessary breathing space to secure a rescue.

Small company CVA moratorium

Schedule A1 to the Insolvency Act 1986 (IA 1986) (small companies moratorium) is

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