CIGA: the insolvency handbrake remains firmly on 


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CIGA, which came into force on 26 June 2020, made both temporary and permanent changes to the UK insolvency regime in response to the Covid-19 pandemic and its consequences.  

As of 26 March 2021 and as widely anticipated by the insolvency industry, the Government has extended temporary restrictions which were due to expire in the coming weeks.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (SI 2021/375) (the Regulations) extend the following provisions of CIGA to 30 June 2021:

  • The restrictions on presenting winding-up petitions and on winding-up orders.
  • The exclusion of small suppliers from the prohibition on terminating a supply contract for the customer's insolvency. 
  • The suspension of wrongful trading liability under section 12 of CIGA.

The Regulations have also extended temporary provisions under CIGA in relation to the Part A1 moratorium process to 30 September 2021. These provisions are:

  • The temporary rules in Schedule 4 to CIGA which support the Part A1 moratorium process.
  • The waiver of the requirement that, if a UK company seeking a Part A1 moratorium is subject to a winding-up petition, it must use a court application.
  • The relaxation of the requirement that in the previous 12 months, a company seeking a Part A1 moratorium has not been in a Part A1 moratorium or an insolvency procedure.

In context, most of these provisions were originally scheduled to expire on 30 September 2020. However, the second wave and the subsequent lockdown pushed these dates back to 30 March 2021, taking some pressure off front line debtors but moving that pressure up the chain to their creditors. 

Even with furlough and the above measures, we have seen the catastrophic impact of the pandemic on the leisure and retail sectors.  However, with the scheduled easing of restrictions on social distancing and the phased reopening of shops, pubs, restaurants and hotels on the horizon, there is real hope that some of these businesses may be able to start to trade again within the coming few weeks.  With many consumers feeling cash rich after months at home, there is clearly a chance that these sectors will bounce back with some vigour.

By extending these measures (for the last time?) the Government has signalled that it will try to protect these and other sectors until, at the very least, they have had an opportunity to get back on their feet.

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