Assessing the Impact of the Corporate Insolvency and Governance Act 2020 in a Post-Covid World: Should the UK government Temporary Measures and Moratorium Provisions remain law in the post-Covid pandemic recovery period?

Abstract

The quickly accelerating Covid-19 pandemic that was first forecast in late 2019 by global health authorities appeared to be reaching critical mass when the UK government enacted its emergency economic response measures in March 2020. The Corporate Insolvency and Governance Act 2020 (CIGA 2020), and its regulatory framework (Temporary Measures and Moratorium Provisions, TMMPs) seemingly represent a significant shift in legislative attitudes concerning company creditor rights enforcement against defaulting corporate debtors. This five Chapter critical assessment advances a different proposition that has two distinct components: (1) whilst CIGA 2020 and TMMPs are innovative UK insolvency – winding up law measures, they are properly understood as a logical extension of the increasingly entrenched ‘rescue culture’ where debtor relief options are given greater prominence; (2) the Covid pandemic provides preliminary, if not yet definitive evidence that TMMPs should remain a permanent Companies Act 2006 (CA 2006) and Insolvency Act 1986 (IA 1986) feature. This evidence is mainly comprised of the high-level scholarship, practitioner opinions, and still emerging CIGA 2020 case law that suggests the new measures will prove to successful – if success is measured by how well UK law balances company creditor versus debtor interests, as opposed to more resolutely permitting creditors to uniformly exercise their insolvency remedies as defined by loan agreement terms. The relative merits of the CIGA 2020 – TMMP approach can be effectively and favourably contrasted with the former UK regime using the extensive case law that has interpreted how creditor rights are enforced. For this reason, the Chapter Four ‘way forward’ moves beyond mere speculation to provide a reasonable cost – benefit assessment of what will likely happen if TMMPs become a permanent UK insolvency law mechanism. The Chapter Four commentary is supplemented by examples taken from Ontario (Canada), Australia, and Delaware (US) insolvent trading Covid examples, given the relatively small available UK case law sample. There is a strong likelihood that their emergency character aside, TMMP (or their longer-term equivalent) are better aligned with prevailing public sentiments – if not measures that will ever be fully embraced by the UK commercial finance community and lenders. It is equally important that UK policymakers closely monitor these developments to determine if the Chapter 4 cost-benefit predictions hold true.