UK corporate insolvency law shake-up announced
Insolvency Bitesize - November 2018
At the end of August, the Government announced, "a number of significant reforms to ensure that the UK's insolvency regime retains its world-leading position including re-invigorating its rescue culture." The reforms, if introduced, are likely to have the greatest impact on restructuring and insolvency in the United Kingdom since the changes introduced by the Enterprise Act 15 years ago.
We have considered these reforms in our client alert. The changes announced include:
- the creation of a new, stand-alone, cram-down procedure which would allow the cram down of a dissenting class of creditors;
- the introduction of a new moratorium (initially for 28 days but extendable) which would restrict the powers of the holder of a Qualifying Floating Charge; and
- a prohibition on the enforcement of contractual termination rights which arise solely because a party has entered into an insolvency procedure (so called "ipso facto" clauses) which may have significant consequences for suppliers of goods and services.
These reforms represent the Government's joint response to its 2016 consultation on the UK corporate insolvency framework and its March 2018 consultation on insolvency and corporate governance.
It remains to be seen when Parliamentary time will be allocated to fleshing out the proposed reforms.