Corporate Insolvency and Governance Bill (HC Bill 128)

15 Further protection of essential supplies: Northern Ireland

(1) After Article 197 of the Insolvency (Northern Ireland) Order 1989 insert—

“197A Further protection of essential supplies

(1) An insolvency-related term of a contract for the supply of essential
5goods or services to a company ceases to have effect if—

(a) the company enters administration, or

(b) a voluntary arrangement approved under Part 2 takes effect in
relation to the company.

(2) An insolvency-related term of a contract does not cease to have effect
10by virtue of paragraph (1) to the extent that—

(a) it provides for the contract or the supply to terminate, or any
other thing to take place, because the company becomes subject
to an insolvency procedure other than administration or a
voluntary arrangement;

(b) 15it entitles a supplier to terminate the contract or the supply, or
do any other thing, because the company becomes subject to an
insolvency procedure other than administration or a voluntary
arrangement; or

(c) it entitles a supplier to terminate the contract or the supply
20because of an event that occurs, or may occur, after the
company enters administration or the voluntary arrangement
takes effect.

(3) Where an insolvency-related term of a contract ceases to have effect
under this Article the supplier may—

(a) 25terminate the contract, if the condition in paragraph (4) is met;

(b) terminate the supply, if the condition in paragraph (5) is met.

(4) The condition in this paragraph is that—

(a) the insolvency office-holder consents to the termination of the
contract,

(b) 30the High Court grants permission for the termination of the
contract, or

(c) any charges in respect of the supply that are incurred after the
company entered administration or the voluntary arrangement
took effect are not paid within the period of 28 days beginning
35with the day on which payment is due.

The High Court may grant permission under sub-paragraph (b) only if
satisfied that the continuation of the contract would cause the supplier
hardship.

(5) The condition in this paragraph is that—

(a) 40the supplier gives written notice to the insolvency office-holder
that the supply will be terminated unless the office-holder
personally guarantees the payment of any charges in respect of
the continuation of the supply after the company entered
administration or the voluntary arrangement took effect, and

(b) 45the insolvency office-holder does not give that guarantee within
the period of 14 days beginning with the day the notice is
received.

(6) For the purposes of securing that the interests of suppliers are
protected, where—

(a) an insolvency-related term of a contract (the “original term”)
ceases to have effect by virtue of paragraph (1), and

(b) 5the company subsequently enters administration, or a
voluntary arrangement subsequently has effect in relation to it,

the contract is treated for the purposes of paragraphs (1) to (5) as if,
immediately before the subsequent administration is entered into or
the subsequent voluntary arrangement takes effect, it included an
10insolvency-related term identical to the original term.

(7) A contract for the supply of essential goods or services is a contract for
a supply mentioned in Article 197(3).

(8) An insolvency-related term of a contract for the supply of essential
goods or services to a company is a provision of the contract under
15which—

(a) the contract or the supply would terminate, or any other thing
would take place, because the company enters administration
or the voluntary arrangement takes effect,

(b) the supplier would be entitled to terminate the contract or the
20supply, or to do any other thing, because the company enters
administration or the voluntary arrangement takes effect, or

(c) the supplier would be entitled to terminate the contract or the
supply because of an event that occurred before the company
enters administration or the voluntary arrangement takes effect.

(9) 25In this Article “insolvency office-holder” means—

(a) in a case where a company enters administration, the
administrator;

(b) in a case where a voluntary arrangement under Part 2 takes
effect in relation to a company, the supervisor of the voluntary
30arrangement.”

(2) In Schedule 5 to the Investment Bank Special Administration Regulations 2011
(S.I. 2011/245S.I. 2011/245), in the Table, after the entry for section 233 insert—

(3) The amendments made by this section have effect in relation to a company
35which enters administration or has a voluntary arrangement take effect in
relation to it on or after the day on which this section comes into force (but in
respect of contracts entered into before, as well as those entered into on or after,
that day).

16 Protection of supplies of goods and services: Northern Ireland

(1) 40After Article 197A of the Insolvency (Northern Ireland) Order 1989 insert—

“197B Protection of supplies of goods and services

(1) This Article applies where a company becomes subject to a relevant
insolvency procedure.

(2) A company becomes subject to a relevant insolvency procedure for the
purposes of this Article where—

(a) a moratorium under Part 1A comes into force for the company,

(b) the company enters administration,

(c) 5an administrative receiver of the company is appointed
(otherwise than in succession to another administrative
receiver),

(d) a voluntary arrangement approved under Part 2 takes effect in
relation to the company,

(e) 10the company goes into liquidation,

(f) a provisional liquidator of the company is appointed (otherwise
than in succession to another provisional liquidator), or

(g) a court order is made under section 901C(1) of the Companies
Act 2006 in respect of the company (order summoning meeting
15relating to compromise or arrangement).

(3) A provision of a contract for the supply of goods or services to the
company ceases to have effect when the company becomes subject to
the relevant insolvency procedure if and to the extent that, under the
provision—

(a) 20the contract or the supply would terminate, or any other thing
would take place, because the company becomes subject to the
relevant insolvency procedure, or

(b) the supplier would be entitled to terminate the contract or the
supply, or to do any other thing, because the company becomes
25subject to the relevant insolvency procedure.

(4) Where—

(a) under a provision of a contract for the supply of goods or
services to the company the supplier is entitled to terminate the
contract or the supply because of an event occurring before the
30start of the insolvency period, and

(b) the entitlement arises before the start of that period,

the entitlement may not be exercised during that period.

(5) Where a provision of a contract ceases to have effect under paragraph
(3) or an entitlement under a provision of a contract is not exercisable
35under paragraph (4), the supplier may terminate the contract if—

(a) in a case where the company has become subject to a relevant
insolvency procedure as specified in paragraph (2)(b), (c), (e) or
(f), the office-holder consents to the termination of the contract,

(b) in any other case, the company consents to the termination of
40the contract, or

(c) the High Court is satisfied that the continuation of the contract
would cause the supplier hardship and grants permission for
the termination of the contract.

(6) Where a provision of a contract ceases to have effect under paragraph
45(3) and the company becomes subject to a further relevant insolvency
procedure, the supplier may terminate the contract in accordance with
paragraph (5)(a) to (c).

(7) The supplier shall not make it a condition of any supply of goods and
services after the time when the company becomes subject to the

relevant insolvency procedure, or do anything which has the effect of
making it a condition of such a supply, that any outstanding charges in
respect of a supply made to the company before that time are paid.

(8) In this Article “the insolvency period”, in relation to a relevant
5insolvency procedure, means the period beginning when the company
becomes subject to the relevant insolvency procedure and ending—

(a) in the case of a moratorium under Part 1A, when the
moratorium comes to an end,

(b) in the case of the company entering administration, when the
10appointment of the administrator ceases to have effect under —

(i) paragraphs 77 to 85 of Schedule B1, or

(ii) an order under section 901F of the Companies Act 2006,

(c) in the case of the appointment of an administrative receiver of
the company, when the receiver or any successor to the receiver
15ceases to hold office without a successor being appointed,

(d) in the case of a voluntary arrangement approved under Part 2
taking effect in relation to the company, when the arrangement
ceases to have effect,

(e) in the case of the company going into liquidation, when the
20liquidator has—

(i) pursuant to Article 80(1), laid the account of the winding
up before a general meeting of the company and given
an explanation of it,

(ii) pursuant to Article 92(1), laid the account of the winding
25up before a general meeting of the company and a
meeting of the creditors and given an explanation of it to
each meeting, or

(iii) pursuant to Article 124(1), given the liquidator’s report
of the winding up to a general meeting of the company’s
30creditors,

or when the appointment of the liquidator ceases to have effect
under an order under section 901F of the Companies Act 2006,

(f) in the case of the appointment of a provisional liquidator for the
company, when the provisional liquidator or any successor to
35the provisional liquidator ceases to hold office without a
successor being appointed, and

(g) in the case of the making of a court order under section 901C(1)
of the Companies Act 2006 in relation to the company, when—

(i) an order made by the High Court under section 901F of
40that Act takes effect, or

(ii) the High Court decides not to make such an order.

(9) In this Article “office-holder”, in relation to a company which has
entered into an insolvency procedure as specified in paragraph (2)(b),
(c), (e) or (f), means the administrator, administrative receiver,
45liquidator or provisional liquidator respectively.

(10) Schedule 2ZZA provides for exclusions from the operation of this
Article.

197C Powers to amend Article 197B and Schedule 2ZZA

(1) Regulations may omit any of sub-paragraphs (a) to (g) of Article
197B(2) (relevant insolvency procedures).

(2) Regulations may amend Schedule 2ZZA so as to—

(a) 5remove or amend any exclusion from Article 197B for the time
being specified there, or

(b) add further exclusions from Article 197B.

(3) In paragraph (2), references to exclusions from Article 197B are to
circumstances in which Article 197B, or any provision of that Article,
10does not apply.

(4) The circumstances referred to in paragraph (3) may be framed by
reference to kinds of company, supplier, contract, goods or services or
in any other way.

(5) Regulations under this Article may make—

(a) 15consequential provision;

(b) transitional and supplementary provision.

(6) Regulations under this Article made by virtue of paragraph (5) may in
particular make provision amending this Order or any other statutory
provision whenever passed or made (including, if paragraph 1(1) or (2)
20of Schedule 2ZZA is omitted, provision omitting Article 197A or 197
respectively).

(7) Regulations may not be made under this Article unless a draft of the
regulations has been laid before, and approved by a resolution of, the
Assembly.”

(2) 25In the Insolvency (Northern Ireland) Order 1989, in Article 2(2), in the
definition of “regulations”, before “Article 359(2)” insert “Article 197C and”.

(3) Schedule 13—

(a) inserts a new Schedule into the Insolvency (Northern Ireland) Order
1989 which provides for exclusions from the operation of Article 197B
30of that Order, and

(b) contains consequential amendments.

(4) The amendments made by this section and Schedule 13 have effect in relation
to a company which becomes subject to a relevant insolvency procedure on or
after the day on which this section comes into force (but in respect of contracts
35entered into before, as well as those entered into on or after, that day).

17 Temporary exclusion for small suppliers: Northern Ireland

(1) Article 197B of the Insolvency (Northern Ireland) Order 1989 does not apply in
relation to a contract for the supply of goods or services to a company where—

(a) the company becomes subject to a relevant insolvency procedure
40during the relevant period, and

(b) the supplier is a small entity at the time the company becomes subject
to the procedure.

(2) In subsection (1)(a) “relevant period” means the period which—

(a) begins with the day on which this section comes into force, and

(b) ends with 30 June 2020 or one month after the coming into force of this
section, whichever is later.

(3) For the purposes of subsection (1)(b), whether the supplier is a “small entity”
at the time the company becomes subject to a relevant insolvency procedure
5(the “relevant time”) is to be determined under subsections (4) to (10).

(4) Where the supplier is not in its first financial year at the relevant time, the
supplier is a small entity at the relevant time if at least two of the following
conditions were met in relation to its most recent financial year—

Condition 1: the supplier’s turnover was not more than £10.2 million;

10Condition 2: the supplier’s balance sheet total was not more than £5.1 million;

Condition 3: the number of the supplier’s employees was not more than 50.

(5) For the purposes of Condition 1 in subsection (4), if the supplier’s most recent
financial year was not 12 months, the maximum figure for turnover must be
proportionately adjusted.

(6) 15For the purposes of Condition 2 in subsection (4), the supplier’s balance sheet
total means the aggregate of the amounts shown as assets in the supplier’s
balance sheet.

(7) For the purposes of Condition 3 in subsection (4), the number of the supplier’s
employees means the average number of persons employed by the supplier in
20its most recent financial year, determined as follows—

(a) find for each month in that financial year the number of persons
employed under contracts of service by the supplier in that month
(whether throughout the month or not),

(b) add together the monthly totals, and

(c) 25divide by the number of months in the financial year.

(8) In subsections (4) to (7) the supplier’s “most recent financial year” is the
financial year of the supplier which, at the relevant time, has ended most
recently.

(9) Where the supplier is in its first financial year at the relevant time, the supplier
30is a small entity at the relevant time if at least two of the following conditions
are met—

Condition 1: the supplier’s average turnover for each complete month in the
supplier’s first financial year is not more than £850,000;

Condition 2: the aggregate of amounts which would be shown in a balance
35sheet of the supplier drawn up at the relevant time is not more than £5.1
million;

Condition 3: the average number of persons employed by the supplier in the
supplier’s first financial year (determined as specified in subsection (7)) is not
more than 50.

(10) 40In this section—

• “entity” means—

  (a)

  a company,

  (b)

  a limited liability partnership,

  (c)

  any other association or body of persons, whether or not
  45incorporated, and

  (d)

  an individual carrying on a trade or business;

Corporate Insolvency and Governance BillPage 76

• “relevant insolvency procedure” has the same meaning as in Article 197B
  of the Insolvency (Northern Ireland) Order 1989.

(11) This section has effect as if it were included in Part 7 of the Insolvency
(Northern Ireland) Order 1989.

5Power to amend corporate insolvency or governance legislation: Great Britain

18 Regulations to amend legislation: Great Britain

(1) The Secretary of State may by regulations amend, or modify the effect of,
corporate insolvency or governance legislation so as to—

(a) change the conditions that must be met before a corporate insolvency
10or restructuring procedure applies to entities of any description
(whether by adding, varying or removing any condition),

(b) change the way in which a corporate insolvency or restructuring
procedure applies in relation to entities of any description, or

(c) change or disapply any duty of a person with corporate responsibility
15or the liability of such a person to any sanction.

(2) Regulations under this section may—

(a) make different provision for different purposes;

(b) make provision binding the Crown.

(3) Regulations under this section must be made in accordance with sections 19 to
2024.

19 Purposes

(1) The Secretary of State may only make regulations under section 18(1)(a) or (b)
if satisfied that the regulations are expedient for any of the following
purposes—

(a) 25reducing, or assisting in the reduction of, the number of entities
entering into corporate insolvency or restructuring procedures for
reasons relating to the effects of coronavirus on businesses or on the
economy of the United Kingdom;

(b) mitigating or otherwise dealing with the effect on corporate insolvency
30or restructuring procedures of any increase or potential increase in the
number of entities entering into those procedures for the reasons
referred to in paragraph (a);

(c) mitigating difficulties that corporate insolvency or restructuring
procedures might impose on a business in view of—

(i) 35any worsening of the financial position of the business in
consequence of, or for reasons relating to, coronavirus,

(ii) constraints on people’s ability to work, or to be in proximity to
each other, as a result of coronavirus, or

(iii) measures for public health taken in response to coronavirus.

(2) 40The Secretary of State may only make regulations under section 18(1)(c) if
satisfied that the regulations are expedient for the purpose of securing that the
duties of persons with corporate responsibility, or the liability of those persons
to any sanction, take due account of the effects of coronavirus on businesses or
on the economy of the United Kingdom.

20 Restrictions

(1) Before making regulations under section 18 the Secretary of State must
consider the effect of the regulations on persons likely to be affected by them
(for example, debtors, creditors or employees).

(2)
5The Secretary of State may only make regulations under section 18 if
satisfied—

(a) that the provision made by the regulations is proportionate to the
purpose for which it is made,

(b) that it is not practicable without legislation to bring about the result
10intended to be brought about by that provision, and

(c) if the Secretary of State could make the same provision in other
subordinate legislation, that doing so would risk not achieving the
purpose for which the regulations are made (because of possible delay
or for any other reason).

(3) 15Regulations under section 18—

(a) may not create a criminal offence or civil penalty (but may modify the
circumstances in which a person is guilty of an existing offence or liable
for an existing civil penalty);

(b) may not make provision so as to impose or increase a fee.

(4) 20Regulations under section 18 may not make provision that could be made by
an Act of the Scottish Parliament unless the Secretary of State has first
consulted the Scottish Ministers.

21 Time-limited effect

(1) Regulations under section 18 must be framed so that any provision made by
25them—

(a) has effect only for a period not exceeding six months, or

(b) applies only in relation to circumstances occurring in a period not
exceeding six months.

(2) This does not prevent further regulations under section 18 from—

(a) 30making the same provision for, or applying in relation to, subsequent
periods (not exceeding six months at a time);

(b) extending (by up to six months) the period for or in relation to which
earlier regulations under that section apply.

(3) The Secretary of State must keep regulations under section 18 under review
35during the period for which they have effect or in relation to which they apply.

(4) If on such a review the Secretary of State is satisfied that that period—

(a) is longer than expedient for the purpose for which the regulations were
made, or

(b) has ceased to be proportionate to that purpose,

40the Secretary of State must by regulations under this subsection revoke or
amend the regulations as appropriate.

(5) Regulations under subsection (4) may contain transitional provision or
savings.

22 Expiry

(1) The Secretary of State may not make regulations under section 18 after 30 April
2021.

(2) Where regulations under section 18 are in force on the date specified in
5subsection (1), that subsection does not—

(a) affect the continued operation of the regulations, or

(b) prevent the making of further regulations under section 18 on one or
more occasions, where those further regulations make the same
provision for, or applying in relation to, subsequent periods (not
10exceeding six months at a time).

(3) The Secretary of State may by regulations substitute a later date for the date for
the time being specified in subsection (1).

(4) The power in subsection (3)—

(a) may not be exercised so as to substitute a date which is later by more
15than a year, but

(b) may be exercised more than once.

23 Consequential provision etc

(1) The Secretary of State may by regulations make consequential, incidental or
supplementary provision, or transitional provision or savings, in connection
20with provision made by regulations under section 18.

(2) Regulations under this section may—

(a) make provision by amending or modifying the effect of any enactment
(including this Act);

(b) make different provision for different purposes;

(c) 25make provision binding the Crown.

24 Procedure for regulations

(1) Regulations under sections 18 to 23 are to be made by statutory instrument.

(2) A statutory instrument containing regulations made under section 18, other
than one to which subsection (5)(a) applies, must be laid before Parliament as
30soon as reasonably practicable after being made.

(3) Regulations contained in a statutory instrument laid before Parliament by
virtue of subsection (2) cease to have effect at the end of the period of 40 days
beginning with the day on which the instrument is made, unless during that
period the instrument is approved by a resolution of each House of Parliament.

(4) 35In calculating the period of 40 days, no account is to be taken of any time
during which—

(a) Parliament is dissolved or prorogued, or

(b) both Houses of Parliament are adjourned for more than 4 days.

(5) A statutory instrument containing—

(a) 40regulations under section 18 which merely revoke other regulations
under that section (with or without transitional provision), or

(b) regulations under section 21(4),

is subject to annulment in pursuance of a resolution of either House of
Parliament.

(6) Regulations under section 22(3) may not be made unless a draft of the statutory
instrument containing them has been laid before, and approved by a resolution
5of, each House of Parliament.

(7) A statutory instrument containing regulations under section 23 is subject to
annulment in pursuance of a resolution of either House of Parliament (unless
the regulations were contained in a statutory instrument laid before Parliament
by virtue of subsection (2)).

25 10Interpretation

(1) In sections 18 to 24 and this section—

• “coronavirus” means severe acute respiratory syndrome coronavirus 2

  (SARS-CoV-2);

• “corporate insolvency or governance legislation” means—

  (a)

  15the Insolvency Act 1986, except so far as relating to the
  insolvency or bankruptcy of individuals,

  (b)

  Part 26A of the Companies Act 2006 (arrangements and
  reconstructions for companies in financial difficulty),

  (c)

  the Company Directors Disqualification Act 1986,

  (d)

  20this Act,

  (e)

  any subordinate legislation made under the enactments
  specified in paragraphs (a) to (d),

  (f)

  the Cross-Border Insolvency Regulations 2006 (S.I. 2006/1030S.I. 2006/1030),
  and

  (g)

  25after IP completion day, Regulation (EU) 2015/848 on
  insolvency proceedings;

• “corporate insolvency or restructuring procedure” means—

  (a)

  a moratorium under Part A1 of the Insolvency Act 1986;

  (b)

  a company voluntary arrangement under Part 1 of that Act
  30(including a moratorium under section 1A of that Act in a case
  where such a moratorium applies after the coming into force of
  paragraph 30 of Schedule 3);

  (c)

  administration under Part 2 of that Act;

  (d)

  receivership to which Part 3 of that Act applies;

  (e)

  35winding up under Part 4 or 5 of that Act;

  (f)

  the procedure provided for by Part 26A of the Companies Act
  2006;

• “enactment” includes an Act of the Scottish Parliament and an instrument
  made under such an Act;

• 40“person with corporate responsibility” means—

  (a)

  in relation to a company, a director, manager, secretary or other
  officer of the body,

  (b)

  in relation to a partnership or limited liability partnership, a
  partner or member, and

  (c)

  45in relation to any other entity, a person with responsibility for
  managing the entity;

• “subordinate legislation” has the meaning given by section 21(1) of the
  Interpretation Act 1978.