Included in this update: Corporate Insolvency and Governance Bill introduced to Parliament; FRC updates guidance on corporate governance and reporting and more... 

Corporate Insolvency and Governance Bill introduced to Parliament

The government has published the Corporate Insolvency and Governance Bill (Bill). The Bill is partly a response to the COVID-19 pandemic but its reforms also have their roots in the government response to the consultation undertaken after the collapse of BHS. As regards company meetings and other governance formalities, the Bill's proposals have largely been set out in two Q&As published by the Department for Business, Energy & Industrial Strategy (BEIS) in April and May 2020

The Bill has commenced its way through the Parliamentary process on a "fast-track" basis. Nevertheless, it may be subject to amendment and further secondary legislation is also required in certain areas. What follows is, therefore, a high-level summary of its content; a more detailed analysis will follow.


The overarching objective of the Bill is to provide businesses with the flexibility and breathing space they need to continue trading during COVID-19, specifically by easing the governance burden and helping businesses to avoid insolvency.

The Bill's explanatory notes state that it includes three main sets of measures to achieve its purpose:

  • to introduce greater flexibility into the insolvency regime, allowing companies breathing space to explore options for rescue while supplies are protected, so they can have the maximum chance of survival;
  • to suspend temporarily parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability and to protect companies from aggressive creditor action; and
  • to provide companies and other bodies with temporary relaxations in relation to company filing requirements and requirements relating to meetings, including annual general meetings (AGMs).
Overview of content

The Bill includes seven main proposals:

  • Introduction of a company moratorium – This will allow a company in financial distress "breathing space" in which to explore its rescue and restructuring options free from creditor actions. The moratorium will be overseen by an insolvency practitioner acting as a monitor, although the directors will remain in charge on a day-to-day basis.
  • Introduction of a restructuring plan – These provisions will allow struggling companies, or their creditors or members, to propose a new restructuring plan between the company and creditors and members. The measures will introduce a "cross-class cram down" feature that, with the court's sanction, will allow dissenting classes of creditors or members to be bound to a restructuring plan. This means that creditors or members who vote against a proposal, but who would be no worse off under the restructuring plan than they would have been in the most likely outcome were the restructuring plan not to be agreed (and are thus not financially disadvantaged), cannot prevent it from proceeding.
  • Temporary restrictions on winding-up petitions – The government is legislating to prevent any statutory demands made against companies in the period between 1 March 2020 and 30 June 2020 from being used as the basis of a winding-up petition at any point on or after 27 April 2020. In addition, in the period from 27 April 2020 to 30 June 2020, any creditor asking the court to make a winding-up order on the grounds of a company being unable to pay its debts must first demonstrate that the inability to pay was not caused by the pandemic. Depending on when the Bill comes into force, the relevant restriction period may extend beyond 30 June 2020.
  • Temporary suspension of wrongful trading liability – Where the court is considering whether to declare a director liable to contribute to a company's assets under wrongful trading provisions and is considering the amount to be contributed, it will not take into account losses incurred during the period in which businesses were suffering from the impact of the pandemic. The deterrent to continuing to trade during that period will therefore be removed. Certain financial services firms and public-private partnership project companies are excluded from the suspension. The period in question commences on 1 March 2020 and ends on 30 June 2020 or one month after the provision comes into force, whichever is the later. However, in the event that the impact of the pandemic on businesses continues beyond the end of that period, it may be extended for up to six months using secondary legislation, and that process may be repeated, extending the suspension period further.
  • Prohibition on termination clauses in supply contracts – The Bill will prohibit termination clauses that engage on insolvency or are based on past breaches of contract. This will mean that (subject to certain exclusions) contracted suppliers will have to continue to supply, even where there are pre-insolvency arrears.  
  • Temporary changes to holding AGMs and general meetings – The Bill introduces temporary relaxations to enable companies and other bodies to hold AGMs and other meetings in a manner that is consistent with their constitutional arrangements and the need to limit the spread of COVID-19. Accordingly, the Bill provides that a meeting need not be held at a particular place; that meetings may be held and votes may be cast by electronic or other means; that a meeting may be held without a quorum of participants having to be together in one place; and that members do not have the right to attend in person, to participate other than by voting, or to vote by particular means. Members will however continue to have a right to vote by some means. The requirements of a qualifying body's constitution or rules, and any relevant provisions in legislation, will have effect subject to these temporary provisions.
    • The measures also extend the period within which companies and other bodies must hold an AGM – those with a deadline for holding an AGM expiring between 26 March 2020 and 30 September 2020 will be given until 30 September to hold their AGM. There is also a power to provide for further temporary extensions for any deadlines for holding an AGM – if this is used, any extension can be for no more than three months at a time and the period must not be extended beyond 5 April 2021.
  • Extensions to some Companies House filing requirements – The Bill proposes to provide all public companies required to deliver accounts and reports to the Registrar of Companies after 25 March 2020 with an automatic extension until the earlier of 30 September 2020 and the last day of the period of 12 months immediately following the end of their accounting reference period. No further regulations will be needed to take this proposal forward.
    • The Bill also proposes to provide the Secretary of State with a power to make regulations to extend deadlines for certain filings of other entities including in relation to accounts (under Part 15 of the Companies Act 2006 (2006 Act)); annual confirmation statements (Part 24, 2006 Act); notices of related relevant events under the 2006 Act; and registration of charges (Part 25, 2006 Act). Any additional measures made to extend other filing deadlines will expire at the latest on 5 April 2021. Companies House has also issued related guidance.

FRC updates guidance on corporate governance and reporting 

The Financial Reporting Council (FRC) has updated its guidance for companies on corporate governance and reporting (including interim reports) during the COVID-19 pandemic to include additional guidance on the reporting of "exceptional or similar" items and Alternative Performance Measures (APMs).

Exceptional or similar items

Companies should:

  • be even-handed in identifying any gains as well as losses;
  • not describe amounts as 'non-recurring' or 'one-off' if they are also expected to arise in future periods;
  • not disclose costs (sometimes described as 'stranded', 'sunk' or 'excess') as exceptional solely because of a reduction in, or elimination of, the related revenue streams due to the COVID-19 crisis; and
  • not identify incremental costs as exceptional if they result in incremental revenue that is not also described as exceptional; for example, additional staff costs related to managing unusually high levels of sales of in-demand items.

Should the effects of coronavirus be pervasive and hard to quantify, the FRC states that it is helpful to provide narrative disclosures explaining the nature of the items and the uncertainties around them.


APMs should be presented consistently year-on-year. However, the FRC states that there may be circumstances where the COVID-19 crisis has, for example, resulted in a company making changes to its operations or business model. These may result in changes to the APMs used to run and monitor the business. In these circumstances, readers should be informed of any such changes and provided with an explanation of why they provide reliable and more relevant information.

Mixed approach to COVID-19 salary sacrifice and dividends, poll finds

According to a poll released by The Chartered Governance Institute and governance recruitment specialist The Core Partnership, companies and other organisations are taking a mixed approach to salary sacrifice during the Coronavirus pandemic. Some 41% of executive directors have taken a voluntary reduction in base salary (50% have not), 31% of non-executive directors have taken a reduction (56% have not) and 31% of senior managers on the management board have taken a reduction (60% have not). There is less disparity in terms of the amount of the reduction with the majority of people across all three groups taking a 20% cut.

In terms of dividend payments, 42% of those companies that responded to the survey were not planning to pay a dividend this year, 26% were and 32% were unsure.


Key Contacts

Richard Preston

Richard Preston

Managing Associate, Governance and Compliance
London, UK

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Neville Moore

Neville Moore

Legal Director, Corporate Finance

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Jack Edwards

Jack Edwards

Associate, Corporate Finance
London, UK

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