Will the Corporate Insolvency and Government Act 2020 have unintended negative cash flow consequences for smaller suppliers?

Question

https://www.crownofficechambers.com/2020/07/07/the-corporate-insolvency-and-governance-act-2020-and-its-impact-on-the-construction-industry/

Andrew Crawford · Answer

Steve

The short answer is yes it may have, but that it would be limited to 40 days from the Moratorium date and then you have to think that if a company decides to seek a moratorium, the state of affairs must be very bad and by entering into a moratorium, this then provide breathing space [40 days] for that company to perhaps, save itself and the creditors.

The bigger issue I can see though that will create some difficulty is in regards to termination clauses being ineffective once a company is insolvent. Pre this Act, if a contracting party becomes insolvent, the other party can, under say, the JCT standard form, terminate the employment of the insolvent party. They will then engage another firm, to complete the balance of the existing Sub-Contract Works. The Act makes this termination in effective, so the Contractor cannot lawfully terminate and will have to discuss with the other party [on the basis that a moratorium has been executed] completion of the Sub-Contract Works. This may create delay to the Main Contract Works.

Will the Corporate Insolvency and Government Act 2020 have unintended negative cash flow consequences for smaller suppliers?

Insolvency

Steve Hardy

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