The Corporate Insolvency and Governance Bill became an Act of Parliament with almost breakneck speed to receive royal assent on 25th June. A fact that is even more remarkable when you consider that aspects of it had been in consultation for almost 8 years and that this was done at the height of the Covid-19 pandemic.
For Turnaround Practitioners the general tenet of the Act is extremely welcome. Personally I have been keen to see a legislative framework for turnaround for many years and have seen numerous situations where the now enacted moratorium provisions would have greatly assisted in saving a business.
The timing and speed of the legislation owes much to the likely impact on the economy as we move into the immediate post-Covid period. The Chancellor demonstrated his concerns for the economy in his opening remarks to his summer statement today stating unequivocally, “hardship lies ahead”.
The Chancellor made reference to the Government’s support being in three phases, the third and final being recovery which will not arrive to late this year or perhaps early 2021. The challenges facing business and the economy in the next year are immense.
As the JRS unwinds and some of the bills accrued have to be paid, not least the deferral of Crown Debts, the Chancellor has clearly identified that the economy will need to be shored up and the recovery supported. CIGA 2020 has the potential, properly used, to be a very powerful tool in the recovery.
It is not my intention here to delve into the details of the new legislation or analyse the key measures but to take a broader view and look at the practical implications for stakeholders in this new rescue culture.
The key to the whole process is the restructuring plan. The Act sees the moratorium as breathing space to enable this plan to be formulated. The legislation states that the restructuring plan “should result in better outcomes” for a company in financial distress.
The plan will require court sanction and places the obligation on the “Monitor” to confirm that it is “likely to achieve the rescue of the company as a going concern”. As soon as I read that part of the Bill my mind went to numerous meetings with bankers where I have been instructed to review or prepare management accounts and forecasts and provide my opinion on the achievability of the plan.
Banks have, in my experience consistently been more supportive of such plans which have been reviewed / prepared by a turnaround professional. Doubly so in the case of IfT members. This is the essence of what I do creating a plan and then working alongside the directors and senior management team to implement it.
The new title and formal regulatory framework should not change the reality or practical application. All stakeholders would be well advised to talk to an IfT member – to quote from the IfT’s response when the bill was published the “moratorium requires hand-on turnaround skills, IfT accredited professionals with a successful business turnaround track record are well placed to ensure success.”
The two key takeaways for stakeholders are, get the right advice and get it early, whether it is the owners, directors, bankers or other advisers engaging a turnaround professional at the earliest opportunity is a pre-requisite.
For more details or to arrange an initial free of charge consultation email Steve
[email protected] , call 0777 444 9300 or click the contact link on this page.
For more details of The Institute for Turnaround go to https://www.the-ift.com
And for the IfT’s detailed response to the new legislation https://www.the-ift.com/wp-content/uploads/2020/06/Corporate-Insolvency-and-Governance-Bill-Response.pdf
