Corporate Insolvency and Governance Act 2020 (CIGA)

The introduction into law of the Corporate Insolvency and Governance Act on the 26th June 2020 represents the most significant reforms to the UK insolvency and restructuring framework for nearly two decades. The reforms which had been in train since 2016 have been fast-tracked through the legislative system to aid the support to struggling businesses as a result of the Covid-19 emergency. The legislation is complex and focuses on both permanent measures together with temporary assistance designed to alleviate pressures and difficulties brought about as a result of the effects of Covid-19.

The key permanent provisions can be summarised as follows:


This is a brand new legal process available to companies who are or at risk of becoming insolvent. A moratorium provides a statutory breathing space from creditors to formulate a rescue plan either by restructuring or by a Company Voluntary Arrangement (CVA). With certain key exceptions, the company will not have to pay debts falling due prior to the moratorium but will have to pay debts falling due during the moratorium including rents and employee entitlements, including redundancy pay. The moratorium will prevent the enforcement of security (e.g. by a bank or other secured creditor), the commencement of insolvency or other legal proceedings against the company and also the forfeiture of a lease by a landlord.

The moratorium will last for an initial 20 business day period with the ability to extend for a further period of 20 business days without consent and with the possibility of further extensions with consent for up to one year.

The moratorium is a ‘debtor in possession’ procedure, and the company remains under the control of its directors throughout the moratorium period. It is initiated by filing the documents at Court. The process must be overseen by a monitor appointed by the company (or the Court, if appropriate). The monitor must be a Licenced Insolvency Practitioner whose role is to oversee and give certain consents but not to be directly involved in the day to day running of the business. In reality, the proposed monitor will have been consulted prior to the formal proceedings in order to assess the business and form the opinion that the company is likely to be able to be rescued as a going concern. 

During the Covid-19 period, the statement that the company is likely to be rescued as a going concern or would do so if it were not for any worsening of the financial position of the company for the reasons relating to Coronavirus. 

It is, therefore, crucial that directors consult a Licenced Insolvency Practitioner at an early stage whilst rescue remains a possibility. When acting as a monitor, the IP will be an officer of the Court and must retain the view that the company is genuinely capable of rescue. The procedure must not be used if there is no prospect of this or as a delaying tactic.

Restructuring Plan

The plan has been added to Companies Act legislation and is seen to be similar to a scheme of arrangement which many companies already use to restructure their debts. Creditors are to be divided into classes or groups based on the similarity of their rights prior to and as a result of the plan (for example, secured groups and unsecured groups). If 75% in value of one class of creditor approves the plan and it delivers the prospect of a better outcome than the next best alternative (administration or liquidation), then the plan will be binding on all creditors if it is sanctioned by the Court. The Court’s role will be to consider the formulation of classes of creditor, whether each creditor receives more than they would under the next best alternative and whether the plan is fair and equitable.

Termination of Clauses in Supply Contracts

Termination (or ipso facto) clauses are often a prohibitive barrier to rescue and recovery. Often a company entering into insolvency or a restructuring procedure will need a continued supply of particular goods or services. It is not unusual for the supplier concerned to hold the company to ransom threatening to terminate unless arrears are paid, and the terms of continued supply are made more favourable to them. Under the new legislation, the supplier will be forced to supply on the same terms and will not be guaranteed any arrears. There are certain exemptions and also a temporary ‘Coronavirus’ exemption for small suppliers suffering financial hardship during the pandemic. These new measures are in addition to the existing legislation in respect of the continued supply of utilities, IT, etc.

Some of the temporary measures implemented by the Act as a consequence of the Coronavirus pandemic have been featured in our earlier blogs however they are now enshrined in statute and are worth re-affirming below.  

Suspension of Wrongful Trading Provisions

When a company goes into administration or liquidation, and a Court is asked to assess whether a director should make a contribution to the assets of a company under wrongful trading provisions, it is to assume that the director is not responsible for any worsening of the financial position of the company or its creditors retrospectively from 1st March 2020 up to 1 month after CIGA came into force. It is worth re-stating that wrongful trading is not the only provision where IPs can seek recompense from a director and is, in reality, costly to prove and infrequently used. This temporary relaxation will not prevent IPs from pursuing any acts of preference, transactions at under-value or from pursuing legitimate debts, e.g. overdrawn directors’ loan accounts. It is also worth noting that actions in periods before and after the temporary relaxation are capable of being considered in wrongful trading situations.

Statutory Demands & Winding Up Petitions

The legislation seeks to temporarily remove the threat of statutory demands and winding up proceedings where the unpaid debt is due to the effects of Coronavirus. Statutory demands will be void if issued against the company between 1st March 2020 and one month after CIGA became law. Winding Up Petitions cannot be presented during this relevant period unless the creditor has reasonable grounds to believe that Coronavirus has not had a financial effect on the debtor. The meaning of ‘financial effect’ has a low threshold. Coronavirus has a financial effect on a debtor if its financial position worsens in consequence of or for reasons relating to Coronavirus. 

General Meetings of Shareholders

Members’ and other meetings may now be held remotely as the legislation temporarily overrides more restrictive requirements in legislation or a company’s constitution.

Company Filing Requirements

CIGA has temporarily granted an extension in respect of certain company filing requirements up to April 2021. These are generally for documents outside of formal insolvency proceedings and your accountant or other advisors ought to be able to assist further.

Whilst many of the provisions of CIGA are temporary due to Coronavirus, the moratorium, restructuring plan and the ban on ipso facto clauses are long-awaited and welcome additions to the existing insolvency and restructuring regimes available.


At Poppleton & Appleby, we welcome these measures and will be happy to discuss with our clients and referring accountants.

The Partners, Charles Brook, Stephen Wainwright and Allan Cadman, together with the support team, have vast experience and have always been at the forefront of reforms to the profession over the years.

Please contact any of the Partners for bespoke and tailored advice to individual circumstances.