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We need spend little time discussing the impact of COVID-19, not just on our lives, but on business and the economy.  Various measures have been implemented by the Government in response to the pandemic.  These have included the acceleration of the Corporate Insolvency and Governance Act 2020 (“CIGA”), which was first announced in August 2018.  While insolvency legislation is a devolved matter within the remit of the NI Executive, the changes have also been implemented in this jurisdiction.

The most significant permanent changes include:


The moratorium seeks to give struggling businesses “breathing space” whereby directors will be allowed to retain control of the business and explore rescue and restructuring possibilities, while being protected from creditors.  It lasts for an initial 20 business days, but can potentially be extended, with or without creditor consent.

During the moratorium period a licensed Insolvency Practitioner is appointed to act as a “Monitor” and to oversee the moratorium.  Creditors have the ability to challenge the actions of the Monitor (or the company’s directors) if they have grounds to believe that their interests have been unfairly prejudiced.

Restructuring Plan

This is a new restructuring procedure that allows a company to bind all creditors, including those classes of creditors that may vote against the plan.  This is achieved via the use of a “cross-class cram down” provision, which can be imposed provided that dissenting classes of creditors are no worse off than they would be in the relevant alternative (e.g. liquidation).

Termination Clauses

In addition, the CIGA seeks to prevent suppliers from relying on contractual clauses allowing for termination in the event of a company’s insolvency or impaired financial position.  For instance, a creditor would be unable to insist on payment of pre-insolvency debts in order to secure future supplies and the same result could not be achieved by alternative means, e.g. increasing the price of future supplies or implementing less favourable payment terms. Careful consideration will have to be given to the drafting and negotiation of new contracts involving the supply of goods or services as a result of the implications of CIGA.

Temporary Changes

In addition to the above, temporary measures have been introduced to mitigate the economic consequences of COVID-19, including:

  • the suspension of the wrongful trading rules, which removes the threat of personal liability for directors in order to allow otherwise viable businesses to continue to trade and avoid any potential claim for losses caused to the company or its creditors arising from wrongful trading (the suspension has recently been extended until 30 April 2021);
  • the voiding of statutory demands served from 1 March 2020, where the debt has arisen due to financial pressures linked to COVID-19, and preventing the issuing of Winding Up Petitions until 31 March 2021, unless the creditor has reasonable grounds for believing that COVID-19 had no impact on the debtor and its ability to pay.


The immediate impact of COVID-19 on business and the economy is clear.  For many, the future is an uncertain road with many unknowns.  The CIGA represents a significant development in UK/NI insolvency legislation and seeks to protect struggling businesses while balancing the rights and entitlements of creditors.

Please contact us if you have any queries in relation to, or have been impacted by, the introduction of the CIGA or insolvency generally.

Should you require any further information or advice on any issues arising from the above or insolvency matters generally, please contact the Insolvency & Dispute Resolution Unit:-                                                          

Tel: 028 9024 5034

Copyright 2020 Elliott Duffy Garrett

Every care has been taken in the preparation of this bulletin; readers are advised however to seek legal advice in relation to specific issues.