Michelle Thorp, CEO
Other articles (Insolvency Practitioner, June 2020):
- Kevin Hellard, President
- An update from HMRC
- Warning about Insolvency Practitioner identity fraud and scam websites
- Job Vacancy: Deputy Chief Inspector
- IPA Members LinkedIn group
- Join an IPA Committee
- SARs: New glossary codes
- SARs online submissions: User update
- SARS in Action issue 5
- Risk based changes to monitoring
- Five minutes with… Alan Limb, Inspector at the IPA
- Guest article from Dunedin Advisory
Hello all. Following our summary on the Corporate Insolvency and Governance Bill carrying changes to corporate insolvency law, I wanted to explore how some of the measures may work in practice, now that we have had the opportunity to consider the Bill in more detail.
We expect the Bill to be ratified in early July, subject to parliamentary approval and/or amendment. To read about all the measures, you can access government factsheets on the Bill here.
You may be aware that the Bill’s eight key measures include a moratorium, of which there will be two distinct types. The moratorium will afford companies some breathing space to pursue a rescue plan, and as you may be aware, this measure creates the role of Monitor, which will have to be fulfilled by an Insolvency Practitioner so is of particular significance. The Monitor must supervise the company’s affairs to evaluate if the company can be rescued as a going concern.
The first type of moratorium is specifically in relation to Covid-19. It has its own unique test and adds “or would do so if it were not for any worsening of the financial position of the company for reasons relating to Coronavirus” to the end of the proposed Monitor’s statement that it is likely that the company would be rescued as a going concern as a result of the moratorium. The period of availability of this variation is set to end on 30 June 2020, but the period can be extended and it probably will be. The second type of moratorium is available for the longer term and is a standard moratorium.
The Bill’s restrictions on termination clauses being brought in to prevent suppliers from stopping, or threatening to stop, supplying businesses in an insolvency or restructuring procedure do not apply to small company suppliers as they are temporarily exempt during the Covid-19 response situation.
A small company supplier is defined as follows: where the supplier is not in its first financial year at the relevant time, the supplier is a “small” entity if at least two of the following conditions were met in relation to its most recent financial year:
- their turnover was not more than £10.2 million;
- their balance sheet total was not more than £5.1 million;
- the number of the supplier’s employees was not more than 50.
As 90% of UK businesses meet the third criterion, fewer companies may be affected by this exemption than it may appear at first.
We also note that just over half of the powers in the Bill are “Henry VIII” powers, meaning that they can be amended or repealed by the Government making new regulations without the need for additional legislation.
We continue to consider the Bill and will monitor it in practice, offering input on behalf of our members to help ensure the measures work fairly. Look out for training on the Bill, to be available soon.
Elsewhere in this month’s newsletter, we have, amongst other articles and features, an important message on cyber security; an update on Anti-Money Laundering Suspicious Activity Reports glossary codes and guidance; an update from HMRC; and a guest article from Dunedin Advisory on Scottish restructuring tools for companies.
As Covid-19 restrictions start to ease, the impacts continue to be felt. Please do let me know if the IPA can do anything to help members, or if we might lobby for change on your behalf.
Best wishes for the rest of the month from myself and the IPA team.