Government responds to insolvency and corporate governance consultations

by Dentons


At the end of August, BEIS (finally) responded to a May 2016 consultation paper which reviewed the UK's corporate insolvency framework. It also took the opportunity to respond to wider insolvency and corporate governance issues which were the subject of a consultation in March 2018.

At the time of the first consultation, Dentons provided the government with its views on the proposed reforms, many of which have been taken on board in the recent government response. (For our previous articles click here.)

In this article, we review the reform proposals to the corporate insolvency framework as they now stand, compared to what was proposed in the original consultation.

A new pre-insolvency moratorium

Sticking with the plan: The government remains committed to the idea of a new moratorium available to all companies against creditor action while a company is given breathing space to consider its rescue options. This idea was largely favoured by respondents to the 2016 consultation, including Dentons. Thankfully, and as supported by Dentons, the moratorium will not be a compulsory gateway before starting an administration (or other rescue procedure). Nor will it be a bar to companies negotiating informal contractual standstill arrangements with creditors without the use of a statutory moratorium.

How long? The moratorium can last "up to" three months, but will have an initial 28-day period, which may be extended. The government has taken on board respondents' comments that a blanket three-month period seemed too long for all situations. If the company has proposed a scheme or CVA (for example) during the moratorium, but the moratorium "runs out" before the outcome has been determined e.g. because the relevant meetings have not yet taken place, the moratorium will automatically extend until the point where creditors approve or reject the proposals. The moratorium's time period is also intended to be stand alone. If the company enters into administration after using a moratorium, the administration period will be unaffected by this previous moratorium and will still run for 12 months which is a welcome clarification.

How to apply? The government intends to model the new moratorium on the existing administration moratorium and have it triggered by filing similar papers at court as with the current out of court administration appointment regime. This is a sensible solution rather than requiring formal court sanction at a hearing. The existing "small companies moratorium" available to eligible companies proposing a CVA will be repealed and replaced with this new moratorium so that anyone considering a CVA will be able to take advantage of an initial moratorium should they so wish. The test for eligibility of the moratorium is proposed to be one of prospective (not actual) insolvency, based upon a requirement that the company will become insolvent if action is not taken. The test will be judged on the balance of probabilities i.e. that a rescue is more likely than not. The monitor, as an insolvency professional, and not the directors, would be responsible for ensuring the company meets this test. Certain companies will be excluded from the moratorium, but previous recent insolvency it seems will not be a bar. Unlike in current administrations, the monitor will not be able to consent to actions that contravene the moratorium, such as taking legal proceedings.

Who will be in charge during the moratorium? Directors will remain in control of the company and the new "monitor's" role will be limited and will cover assessing and continuing to review the eligibility requirements and sanctioning asset disposals (which are outside the ordinary course of business) during the moratorium period. The government has kept the provisions prohibiting individual monitors (but not other members of their firms) from accepting a subsequent appointment with a company as a liquidator or administrator for 12 months. However, they can still accept appointments as a CVA supervisor. It is likely that this watered down version of the prohibition, which favours large firms, is a reaction to the mixed response the government received to the idea.

Preserving essential contracts for businesses in financial difficulty

A revised approach: The government remains committed to ensuring preservation of "essential supply contracts" during a moratorium period to enable businesses to continue trading in a restructuring. In its response the government sets out a proposal which will prohibit suppliers of goods and services from relying on termination clauses that allow a contract to be terminated on the grounds of formal insolvency (so called "ipso facto" clauses but not other clauses, such as non-payment of liabilities due under the contract, or termination following expiry of the specified contractual notice period). Contractual licences will be covered under these general preservation rules, such as for software or patents. Licences issued by public authorities will be excluded. If a supplier is likely to face "undue financial hardship" as a result of a prohibition, they can apply to court to be able to seek permission to terminate the supplies.

At the time, Dentons raised some concerns about this idea in general, uncertain that a rigid "designation" of contracts as essential would even be possible, not least undesirable. Whilst some respondents thought the proposals would result in a higher number of business rescues, this view was not shared by us. As a result the government no longer intends to require the designation of essential suppliers by a debtor company. It also intends to exempt certain types of financial products and services from the provisions. There is, however, still a long way to go before all the issues surrounding this proposal are ironed out.

A new "flexible restructuring plan"

New wine in old bottles? The government is still committed to introducing a new restructuring procedure that binds both secured and unsecured creditors and introduces a "cram-down" allowing majority creditors to bind the minority, having received positive feedback on such a proposal from the majority of respondents, including Dentons, who welcomed the idea of a stand-alone procedure as an alternative to, but not a replacement for, CVAs and schemes of arrangement. The plan is likely to be modelled on the existing schemes model, but with class and sanction court hearings as part of the process. Those proposing a plan will be able to take advantage of the protection of the new
stand-alone moratorium (which is currently within the purview of the court in the current scheme of arrangement).

Who, how and how long? The new plan will not be available to all companies, with similar financial market entities excluded, as per the current small companies moratorium for CVAs. However, no financial conditions will be set to qualify, so both solvent and insolvent entities will be able to benefit from such a plan, including those already in an insolvency procedure acting via their existing insolvency office holder. Companies proposing a plan would act via their directors (rather than a mandatory appointed supervisor). The parties to the plan would decide who, if anyone, would be needed to oversee its implementation.

Rather than imposing a fixed 12-month period for the plan, the government now states it will be for the parties to decide the time period.

US-style cram down: Dentons has always welcomed the idea of making a new restructuring plan universally binding in the face of dissention from some creditors, subject to there being suitable protection for creditors. In particular, we support the purpose of preventing creditors who are "out of the money" from deriving value from ransom situations, unless this is justified for commercial reasons (such as the need to continue trading with essential suppliers). The government agrees with this.

However, the government may have missed a trick here with the voting requirements suggested, namely to make these plans easier to implement than schemes and therefore increase their popularity.

The issue of how claims should be valued in a plan where dissenting creditors are being crammed down was, as predicted, a contentious topic amongst consultation respondents. Rather than using the minimum liquidation alternative value (which Dentons pointed out has not always been the correct comparator in a scheme scenario) the government is proposing to use a "next best alternative" test.

Legislating for rescue finance? Finally, the government has decided not to pursue proposed changes formalising the rescue finance market.

Exciting times? To implement these changes will represent the single biggest change to the corporate insolvency regime since 2002. It will require amendment to primary legislation. It is difficult, however, to get too excited about them. Whilst (especially post Brexit) anything that makes us more attractive as a restructuring jurisdiction within Europe is to be applauded, we do not envisage these changes will be brought in any time soon. If we look to the US for inspiration, how these principles will fit within the existing UK insolvency framework remains to be seen. The devil, as always, will be in the detail. It is also not certain that they are necessary. The UK already has, in our view, the benefit of a flexible and efficient set of procedures backed up by reasoned case law and practice. Will this overcomplicate the legislation to the detriment of the industry? There is a danger it might!

Not finished there!

The government has also committed to:

  • applying inflation to the current figure for the Prescribed Part pot of assets available to unsecured creditors in an insolvency process, which will now increase to £800,000;
  • bringing in legislation to ensure directors of holding companies must have regard to the interests of a subsidiary company's stakeholders when selling that subsidiary. Directors of a holding company could be subject to disqualification proceedings if they allow the sale of a subsidiary (that then goes into liquidation within 12 months) if they had no reasonable belief that the sale would likely deliver a no worse outcome for the stakeholders of the subsidiary than placing it into formal insolvency;
  • issue further consultation with a view to amending the current legislation relating to preferences to connected parties and extortionate credit transactions; and
  • introduce new directors disqualification legislation to include former directors of dissolved companies within its ambit.

The government is also considering:

  • introducing a requirement for companies of a "significant size" to provide an organogram of their corporate structure and explain how corporate governance is maintained throughout the group;
  • consulting with the FRC on the Stewardship Code to consider how investment mandates given to firms can include reference to stewardship;
  • consulting with legal and accounting bodies to consider whether there should be an overall review of the dividend framework. For example, including a requirement that shareholders should be able to vote on at least one set of annual dividends; and
  • bringing forward proposals to increase the level of training available to directors.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:


Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.