Corporate Insolvency and Governance Bill — breathing space for restructuring?

June 16, 2020
Corporate Insolvency and Governance Bill — breathing space for restructuring?

The Corporate Insolvency and Governance Bill is the biggest change to the UK’s insolvency and restructuring framework for almost 20 years.

With a sharp recession on the cards, it provides breathing space for restructuring, and may well prove instrumental in helping businesses, including those in the renewables sector, that are facing insolvency to turn things around.

My colleague Rebecca Walker blogged about the temporary and permanent changes introduced by the Corporate Insolvency and Governance Bill last month when it was laid before parliament.

It’s been widely welcomed, particularly the permanent changes that were already under discussion well before COVID-19 including —

  • A company moratorium where struggling companies, including those that are already insolvent, are given at least 20 days to put together a rescue plan
  • Changes to termination clauses in supply contracts preventing suppliers from using contractual terms to terminate supply or increase prices if a company enters and insolvency process
  • A mechanism for a company or its creditors to formulate a restructuring plan.

New moratorium

The moratorium, where specific legal actions are restricted for a period of time to allow for a restructuring or insolvency process to be put in place, is perhaps the most significant change.

This essentially suspends a range of creditors’ abilities including chasing debts through the courts or enforcing securities.

With organisations across the board under pressure as a result of the coronavirus pandemic, the moratorium gives struggling businesses a 20-day window initially to develop a rescue plan. Directors can extend this by another 20 days, or for up to a year with creditor consent.

The company remains under director control and no legal action can be taken against it without court consent. Firms will need an insolvency practitioner to act as monitor, who will assess throughout the process if a rescue is likely: providing a key safeguard for concerned creditors.

The monitor will also have considerable control over which debts can be paid and what property can be sold. If creditors aren’t happy with these decisions, they can apply to court.

The moratorium ends if the company enters into a compromise, arrangement or relevant insolvency procedure.

The restructuring plan

The new restructuring plan allows struggling companies, creditors and members to propose an alternative rescue package.

It allows for complex debt arrangements to be restructured and supports the introduction of new rescue finance.

A restructuring plan will need creditor consent — 75% for each class of creditor — and court approval; however, it can be sanctioned by the court as fair and equitable even if not all classes of creditors vote for it.

The court would need to be satisfied the creditors would be no worse off than if the company entered into an alternative insolvency procedure.

These permanent changes could not have come at a more opportune time. They’ve been widely welcomed and are seen as underpinning efforts to help businesses navigate the enormous challenge the coronavirus pandemic has presented.

Many, it seems, will agree with R3 president Colin Haig who said the legislation “…comes not a minute too soon.”

Aberdeen-based partner Tim Thomas specialises in commercial litigation and insolvency law at Ledingham Chalmers. He is highly experienced in a range of commercial disputes in Scotland’s sheriff court and Court of Session.


Get in touch

AREG is the original energy transition organisation, working on behalf of members to empower the energy supply chain and champion its expertise. Please get in touch if you have any questions or would like to find out more about membership.

AREG has played an important role in the growth of Scotland’s renewable energy sector, engaging the supply chain and developing the European Offshore Wind Deployment Centre. However, we are only at the very beginning of the transition that AREG was established to both lead and support so there are still opportunities for companies to get into the constantly evolving renewables supply chain. We look forward to continuing our work together as renewables builds on its place as Scotland’s main source of power, and as we seek to deliver real change in the crucial areas of heat and transport.

Scottish Renewables

Aberdeen & Grampian Chamber of Commerce has worked closely with AREG since its formation. The recent progress in the developments of offshore wind projects by Equinor and Vattenfall are as a result of the work of the group over many years. The north-east is known as the oil and gas capital of Europe. At the Chamber, we believe the region must evolve its position to being recognised as the energy capital. Whilst hydrocarbons will continue to be essential in driving our economy for years to come, the generation of renewable resources will play an increasingly important role in providing cost-effective power, innovative development and economic growth.

Aberdeen & Grampian Chamber of Commerce

The enthusiasm and dedication of the early group that would become AREG was fundamental in us choosing to launch All-Energy in Aberdeen. The first tiny show was held in 2001, and AREG’s Chairman at the time, Jeremy Cresswell, played such an active role that I often describe him in terms such as All-Energy’s ‘midwife’. All-Energy is now the UK’s largest renewable and low carbon energy exhibition and conference in terms of number of attendees, space booked, and number of exhibiting companies. As AREG became firmly established, their presence and support for the event grew spectacularly over the years. We thank them most sincerely for their invaluable input.


Vattenfall has forged a strong working relationship with AREG through the development of the European Offshore Wind Deployment Centre. AREG has worked tirelessly on behalf of the North East and it can take enormous credit for the growth of sustainable energy in the region and the path it has cleared for the region to capture further investment.


Aberdeen City and Shire is emerging as a key location for renewables by successfully transferring its world-class oil and gas expertise into the sector and AREG has done much to advance this through a broad range of initiatives. It has acted as a catalyst in driving further investment in the local economy by engaging with companies, Government, public bodies and existing projects and we have been pleased to support their efforts. Scottish Enterprise will continue to engage with AREG as we increase Scotland’s use of renewable energy.

Scottish Enterprise