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Corporate Insolvency and Governance Bill - Relevant Period

View profile for Stephen Downie
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The Corporate Insolvency and Governance Bill is due for a second reading in the House of Commons on 3 June 2020.

The Bill will commence from the date on which it passes and last for an initial period of one month. This is likely to be up until early July, when the courts in England and Wales are generally expected to start returning to business (in some form).

Under the Bill (which may yet be amended) there is a Relevant Period of suspension of 20 days (starting the following business day) during which winding-up petitions may be delayed or suspended.

This Relevant Period may be extended in various circumstances but, ultimately, the power to extend it is subject to the Bill lapsing, which is unlikely to happen. Indeed, the Secretary of State may extend the Relevant Period for up to six months, meaning the Bill could be in force for the rest of 2020 (or even longer if the act takes longer to pass or is extended further).

These proposals clearly seek to use the current practices applicable to administrators appointed under Schedule B1 of the Insolvency Act 1986, albeit for a very short period (subject to the possible extensions mentioned above).

This means that companies could be protected from being wound-up potentially for the remainder of 2020, dependent on the uptake in such applications by companies and the court’s view on such applications. 

There is also concern as to whether there are enough insolvency practitioners available to act as monitors for these companies and whether it would be of interest to them (as paying an insolvency practitioner for a period of 20 days may be uneconomic for both parties).

The legislation does additionally appear to have ignored the difficulties that the courts may face in diarising and case managing such winding-up petitions, especially with varying dates of suspension granted by the courts - a short suspension of 20 days could in reality lead to a far longer suspension before the matter returns to the court.

Whether this process can truly work in reality, enacted at very short notice and covering a very short period with all of these necessary protections, remains to be seen.

If you require any guidance on the Corporate Insolvency and Governance Bill, please do not hesitate to get in touch.