Major changes to the Corporate Insolvency and Governance Bill

The Corporate Insolvency and Governance Bill 2019-2020 underwent its committee stage in the House of Lords last week. The bill’s report stage, and third reading, are both scheduled to occur on the 23 June 2020. Three important amendments will be proposed to the bill, when compared to the bill as introduced into the House of Commons.

The first, which doesn’t have explicit government backing, is that pre-pack sales out of administration to associated entities, will require a written opinion from the pre-pack pool confirming that the sale is not unreasonable. For this to work efficiently, the process of instructing the pre-pack pool will need to be improved and the quality of its members significantly upgraded. Up until now our experiences of the pool has not been promising.

The second amendment relates to the new moratorium process. Unsecured debts under financial services contracts that are accelerated during the process, will not enjoy enhanced priority ranking amongst unsecured creditors. This did seem to us to be an unexpected bonus for financial creditors and so its removal will not be surprising.

The third relates to both the moratorium and the new restructuring plan. The Pension Regulator and the Pension Protection Fund will receive additional rights, these will include rights to receive information directly and, in certain circumstances, to be treated as creditors.

The second and third amendments are government-initiated. After the bill’s third reading, it will be sent back to the House of Commons for all of the amendments made by the House of Lords to be considered. If the House of Commons consents to them, without further amendment, it would only remain for the bill to receive its royal assent to become law.

Separately, the government has published draft guidance for Monitors under the moratorium process.

> Read our note on major changes to UK insolvency legislation