Corporate Insolvency and Governance Act 2020 and other developments in insolvency and restructuring—implications for construction contracts
Corporate Insolvency and Governance Act 2020 and other developments in insolvency and restructuring—implications for construction contracts

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Corporate Insolvency and Governance Act 2020 and other developments in insolvency and restructuring—implications for construction contracts
  • Restrictions on rights to terminate or do ‘any other thing’—IA 1986, s 233B
  • What is a ‘relevant insolvency procedure?’
  • How do the restrictions on termination and other rights work?
  • Restrictions on termination—exemptions
  • Impact on right to terminate for a repudiatory breach
  • Right to do ‘any other thing’
  • Suspension
  • Payment guarantees and security
  • Step-in rights
  • More...

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) was introduced as part of the government’s response to the economic impact of the coronavirus (COVID-19) pandemic. Among other reforms, CIGA 2020 inserted new provisions into the Insolvency Act 1986 (IA 1986), that are intended to ensure the continuity of supplies to businesses which are in financial difficulties and struggling to pay the supplier, and to restrict the operation of certain contractual rights in contracts for the sale and supply of goods upon insolvency.

CIGA 2020 has significant implications for the construction industry. The provisions expected to directly impact parties to construction contracts are the restrictions on a supplier’s right to terminate or to do ‘any other thing’ where the customer is insolvent, as provided by IA 1986, s 233B (which was introduced by CIGA 2020, s 14). In the construction context, the customer for the purposes of the CIGA 2020 provisions will be the employer under a main contract or a consultant’s appointment, or, in sub-contracts, the main contractor. For convenience, this Practice Note refers to the supplier as the ‘contractor’, and to the customer as the ‘employer’.

The legislation does not provide a definition of a contract ‘for the supply of goods or services’. However, it is likely that the restrictions set out in IA 1986, s 233B will apply to all construction contracts, because

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