Corporate Insolvency and Governance Act 2020, No. 12 (as amended)

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) is a piece of legislation introduced by the UK government to provide temporary relief measures and permanent reforms to the insolvency framework in response to the economic challenges posed by the COVID-19 pandemic. Here's a summary of its key aspects:

Purpose: CIGA 2020 aims to provide businesses with temporary relief measures to help them navigate financial distress caused by the pandemic. It also includes permanent reforms to modernize the insolvency framework and promote corporate rescue and restructuring, enhancing the efficiency and effectiveness of insolvency procedures.

Requirements:

1. Moratorium: CIGA 2020 introduces a new moratorium process that allows financially distressed companies to obtain breathing space from creditor enforcement actions while they develop a restructuring plan. During the moratorium, the company is protected from legal action by creditors, providing it with time to explore rescue options without the immediate threat of insolvency proceedings.
2. Restructuring Plan: The legislation introduces a new restructuring plan mechanism that enables companies to propose a compromise or arrangement with creditors to facilitate a restructuring of their debts. The restructuring plan requires approval by a qualified majority of creditors and the court, providing a flexible and effective tool for corporate rescue.
3. Temporary Provisions: CIGA 2020 includes temporary provisions to provide relief to companies affected by the pandemic, such as temporary suspension of wrongful trading provisions to protect directors from personal liability for trading while insolvent during the crisis period.
4. Corporate Governance Measures: The legislation includes provisions aimed at improving corporate governance practices, such as requiring certain companies to report on their payment practices and policies to promote transparency and accountability in payment practices.

Applicability: CIGA 2020 applies to companies registered in the UK, including public and private companies, limited liability partnerships (LLPs), and other corporate entities. The temporary relief measures provided by the legislation are applicable during the specified crisis period, while the permanent reforms to the insolvency framework apply on an ongoing basis.

Overall, CIGA 2020 aims to provide businesses with the necessary tools and flexibility to navigate financial challenges, promote corporate rescue and restructuring, and enhance corporate governance practices to support economic recovery and resilience in the aftermath of the pandemic.

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) introduces various provisions aimed at restructuring and rescue of financially distressed companies, as well as promoting good corporate governance practices. While it doesn't explicitly outline evidence requirements, it does establish procedures and criteria for certain actions. Here's a summary of how evidence factors into CIGA 2020:

1. Moratorium Evidence: Under CIGA 2020, companies seeking to enter a moratorium must provide evidence to the court that they are unable to pay their debts as they fall due or are likely to become unable to pay their debts. This evidence may include financial statements, cash flow projections, creditor communications, and other relevant documentation demonstrating the company's financial distress.
2. Restructuring Plan Evidence: Companies proposing a restructuring plan under CIGA 2020 must provide evidence to the court that the plan is fair and equitable to all creditors and members affected by the restructuring. This may involve presenting financial projections, valuation reports, creditor agreements, and other evidence supporting the feasibility and fairness of the proposed restructuring plan.
3. Payment Practices Reporting Evidence: CIGA 2020 requires certain companies to report on their payment practices and policies, including the average time taken to pay invoices and the proportion of invoices paid beyond agreed terms. Companies must maintain accurate records and documentation related to their payment practices to comply with these reporting requirements.
4. Director's Declaration Evidence: Under the temporary suspension of wrongful trading provisions introduced by CIGA 2020, directors are required to make a declaration that they have concluded that there is no reasonable prospect of avoiding insolvent liquidation or administration. While this declaration doesn't necessarily require specific evidence, directors are expected to assess the company's financial position based on available information and evidence.

While CIGA 2020 doesn't prescribe specific evidence requirements for all its provisions, evidence plays a crucial role in supporting the various actions and decisions taken under the legislation. Companies, directors, and other stakeholders are expected to maintain accurate records, financial information, and documentation to support their compliance with the requirements and objectives of CIGA 2020.