Reed Smith Client Alerts

The UK Department for Business, Energy and Industrial Strategy introduced the Corporate Insolvency and Governance Bill (the Bill)1 into Parliament on 20 May 2020. The Bill is due to proceed through Parliament on an accelerated timetable and is expected to come into force without changes towards the end of June 2020.

The Bill follows the UK Government’s announcement on 28 March 20202 that it would introduce new insolvency and corporate governance measures to support businesses facing funding and operational difficulties during the COVID-19 pandemic. It also implements the Government’s plans permanently to reform the UK’s insolvency law regime, following a 2018 consultation on insolvency and corporate governance.

For a detailed account of how the Bill intends to affect businesses in the UK more broadly, please refer to our recent client alert “Government publishes bill to reform insolvency and company laws”.

In this alert, we consider in more detail provisions of the Bill relating to (1) the moratorium – a new UK insolvency procedure, (2) limitations on the exercise of termination clauses in supply contracts, and (3) related exclusions.

The limitations on termination narrow the choices available to companies in contracts with counterparties that may enter a UK insolvency procedure. The Bill, though, excludes “contracts relating to financial services” from the scope of these provisions and from the moratorium. These exclusions are drawn broadly and include commodities sale and purchase contracts, and commodity derivatives. That said, some other contracts entered into by companies active in these markets may be affected by the new provisions.