EACTP responds to the 3-Year CIGA Post-Implementation Review
In June, the Insolvency Service published its “Post-Implementation Review” of the Corporate Insolvency and Governance Act 2020 (CIGA), three years since it came into force. Read below the review’s key findings and the EACTP’s response.
10 August, 2023
Key Findings of the 3-Year CIGA Post-Implementation Review
- The permanent CIGA measures have been broadly welcomed by stakeholders.
- Use of Restructuring Plans and the Moratorium is considerably lower than expected. Possible reasons for this include government support through the Covid-19 pandemic, that the industry is taking time to adopt new measures, and the possibility that estimates in the ‘impact assessments’ were too high.
- Amendments could be made to help achieve further benefits and to reduce the burden on businesses.
- Although there is evidence that these changes could lead to more use of the new processes and greater efficiency, the Insolvency Service is not committing to specific reforms.
- The report also recognises that the role of Plan Administrator to oversee the implementation of a Restructuring Plan (RP) sanctioned by the Court could be undertaken by a person not licensed as an IP, it not being an office holder appointment under the Insolvency Act 1986.
- It acknowledges that a primary purpose of the RP is to enable companies with viable businesses struggling to meet debt obligations to restructure with limited disruption to operations. It reports that more clarity on operational issues could help pre-moratorium understanding of an RP by creditors.
- The report also recognises that there is an argument in favour of extending the category of those qualified to act as Monitors beyond IPs.
EACTP’s Response to the Review
The EACTP welcomes the possibility of extending the category of those qualified to act as Monitors beyond IPs. RP preparation and implementation require operational skills that Certified Turnaround Professionals (CTPs) have and these are not the skills of most IPs.
In addition, as the report recognises that RP preparation is enhanced by operational skills and administration, it is logical to recognise CTPs as suitably qualified professionals to act as Monitors, or act as a Monitor and that CTP involvement would improve the effectiveness of CIGA in value preservation of viable businesses in financial distress and go further to achieving the intent of the legislation.
This is an argument the EACTP has long made, having contributed to the original CIGA legislation, making the case for CTPs to be recognised as moratorium monitors.
With the publication of this 3-year post-implementation report, the EACTP sees this as another opportunity to argue the point that restricting appointments to IPs who are not trained in operational turnaround practice dilutes the effectiveness and the intent of the legislation. Including CTP’s with operational turnaround skills as suitably qualified professionals to act as moratorium supervisors of viable businesses in the moratorium would clarify some of the uncertainty, would be an additional benefit to effective business plan preparation, and would counterbalance the reluctance of IPs to engage as supervisors currently being experienced.
We believe the goal is preserving enterprise value which any form of insolvency process doesn’t do.
Fundamental to our case and what we will continue to press is that CTPs have the skills, professionalism, balance of responsibilities and ethics to act in a moratorium to save going concern value and enhance stakeholder recovery, including secured and unsecured creditors according to absolute priority, all at a more efficient cost.