The moratorium is a debtor-in-possession option. It will be available for all companies who meet certain eligibility criteria and qualifying conditions. In short, to be eligible for the new statutory moratorium a company must be (or likely to be) unable to pay its debts but not beyond rescue. This briefing was updated on 2 December 2020.The Corporate Insolvency and Governance Act 2020 (the "Act") received Royal Assent on 25 June 2020 following a fast-tracked legislative process, with the majority of provisions taking effect from 26 June 2020. The bill was introduced as part of the government response to the COVID-19 pandemic in the United Kingdom and the primary intentions of the bill were to: introduce new corporate restructuring tools to the insolvency an On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (“the 2020 Act”) finally entered into force. The moratorium is not all bad news for suppliers. The directors are required to make a statement to Court that, in their view, the company is, or is likely to become, unable to pay its debts. There are restrictions on paying debts for which there is a payment holiday without monitor consent or Court approval. The Act is designed “to make provision about companies and other entities in financial difficulty; and to make temporary changes to the law relating to the governance and regulation of companies and other entities.”. if the company is in administration or liquidation) consents, or with the leave of the Court if the Court is satisfied that the continuation of the contract would cause the supplier hardship. Prescribed information in respect of the restructuring plan will then be sent to every creditor or member who will be entitled to participate at the meeting. if it determines it to be unjust or inequitable), even if the restructuring plan was approved by the requisite amount of creditors. The restructuring plan gives directors another tool when considering restructuring options. The changes are introduced by the Corporate Insolvency and Governance Act 2020. at least one class who would receive a payment or would have a genuine economic interest in the company in the event of the relevant alternative has voted in favour of the plan. Among other provisions, the Act addresses the difficulties faced by UK companies as a result of the COVID-19 pandemic when it comes to holding meetings of shareholders and filing documents with the UK Registrar of Companies (Companies House). a scheme of arrangement or a restructuring plan) or otherwise enters into an insolvency procedure (e.g. Suppliers will be prevented from exercising termination rights (and doing “any other thing”) if the customer enters into a relevant insolvency procedure, i.e. The Insolvency Act 1986 wrongful trading provisions require directors to take every step to minimise loss if they consider that a company has no reasonable prospect of avoiding insolvent liquidation or administration. This is note provides more detail and flags some practical steps that the suppliers of goods and services may wish to consider. Both new and existing contracts for the supply of goods or services will be affected. The Court may may sanction a restructuring plan despite it not having been approved by a class or classes of creditors or members, provided that: The Secretary of State has the ability to vary the conditions for cross-class cram down through the implementation of Regulations. In particular, similarly to the process for a scheme of arrangement, there is a requirement for multiple Court hearings. The intention of this new restructuring mechanism is to fill the gap between CVAs (which cannot bind preferential or secured creditors) and schemes of arrangement (which lack a cross-class cram down mechanism), but not to replace or impact upon either of these two procedures. As mentioned above, the supplier is not only restricted in exercising termination rights, but also may not do “any other thing” which would otherwise be triggered by the insolvency procedure. The monitor will notify all creditors and Companies House of the moratorium. 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