Northern Ireland Assembly approves Corporate Insolvency and Governance Bill
The Corporate Insolvency and Governance Bill was approved in the Northern Ireland Assembly on 1st June 2020. The Bill, which extends Northern Ireland’s legislative provisions to match the emergency measures available in Great Britain, will ensure that vital support is given to local businesses to help them through this period of financial instability.
Measures included within the Bill are as follows:
- Company Moratorium
The Bill gives struggling businesses a formal breathing space to pursue a rescue plan. It creates a moratorium during which no legal action can be taken against a company without leave of the court. If an insolvency practitioner (IP) believes that a company can be saved, notice can be filed at court commencing a moratorium for an initial period of 20 business days. This is a rescue process that will protect the indebted company from creditor action while additional finance is raised. A 20-business day extension to the initial period can be applied if the IP believes it is likely to bring about the rescue of the company as a going concern. This period can be extended for a period of up to one year with creditor consent or at the discretion of the Court.
- Insolvency Action
Creditors cannot use statutory demands to threaten that a company will be wound up if it does not pay what is owed. Any statutory demand made between 1st March and 30th June 2020 will be void.
Creditors are also prohibited from bringing a winding-up petition against a company until 1st July 2020 unless they reasonably believe that the company’s inability to pay its debts is not the result of coronavirus. If they do present a petition, the court will not make a winding-up order until the creditor demonstrates that the pandemic is not the reason the company cannot pay its debts.
- Directors: Personal Liability
The Bill removes the threat, until 30th June 2020, of personal liability arising from wrongful trading for company directors who continue to trade a company through the crisis with the uncertainty that the company may not be able to avoid insolvency in the future Liquidators and administrators will not be able to make a claim against an insolvent company’s directors for any losses to the company or its creditors resulting from continued trading while the wrongful trading rules are suspended. It should be noted that all of the other duties imposed upon directors remain in place.
- New Restructuring Plan
The restructuring measures in the Bill will allow companies in financial difficulty to propose a restructuring plan for the court to approve if it considers it to be fair, equitable and in the interests of creditors. Creditors vote on the plan, but the court can impose it on dissenting creditors provided those creditors are no worse off than they otherwise would be in the next most likely outcome
The above is not an exhaustive list of the measures approved by the Assembly, but it outlines the tools which have been introduced to provide businesses with the best possible chance of surviving the pandemic.
If you wish to discuss the contents of the above article, or wish to discuss any insolvency matter, please contact Andrew Morrow on firstname.lastname@example.org or call 028 9032 9801.