The Corporate Insolvency and Governance Act 2020 (CIGA) is no longer in force
As of today 1 April 2022, some provisions of the CIGA are no longer in force and instead parts of the legislation revert back to what it was “pre-covid”.
What is CIGA?
The Corporate Insolvency and Governance Act 2020 (CIGA) received Royal Assent on 25 June 2020 and came into force on the 26 June 2020. The primary purpose of CIGA was to give businesses breathing space during the Covid-19 pandemic. Some of the legislation was permanent and therefore the relaxation of the temporary rules does not apply.
The elements of CIGA that remain are:
Whilst not appropriate for every single company, the moratorium will continue to give companies breathing space to formulate a plan when creditors seek payment of their invoices. Companies will not have to pay debts falling due prior to the moratorium but will need to pay debts during it. The purpose of the moratorium is to allow directors 20 working days in which they are able to consider options once a moratorium is granted by the court.
- A ban on the operation of termination provisions.
This stops suppliers from suspending or terminating the delivery of goods and services where the client company has entered into a restructuring or insolvency procedure. The thought process behind this provision is to try and enable a company that is in potential jeopardy to continue to trade as it will likely need the goods are services that are being supplied. As ever, there are caveats to this provision and advice should be sought.
- The pre-insolvency rescue and reorganisation procedure.
Involves creditors being divided into classes, based on their debt owed and relationship. The terms of the plan still require court approval and creditor consent, but each creditor will be given the opportunity to vote. Providing that one “in the money” class of creditors agrees to the plan, it will become binding. This is conditional on the plan delivering a better outcome for the creditors. The plan can be proposed by the company, member, insolvency practitioner or creditor.
The parts of the CIGA that now no longer apply:
- Creditors no longer need to serve a CIGA Schedule 10 notice on the debtor 21 days before issuing a winding-up petition; and
- The minimum amount to issue a winding-up petition reverts back to £750 rather than the temporary £10,000.
Please also be aware that winding up and bankruptcy petitions in relation to commercial rent arrears are covered under the Commercial Rent (Coronavirus) Act 2022 which we can also provide advice on.