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two paths
The three most important additions introduced were:-

We’ve talked about the insolvency moratorium at length elsewhere but it’s a positive development that can only help companies by giving them breathing space to restructure their businesses while legally protected from creditor actions. 
Ipso Facto clauses used to allow suppliers to terminate contracts for goods and services if the company underwent an insolvency event but this orders them to keep the supply going which will give the company a better chance of trading their way back to profitability. 
The restructuring plan procedure, which some learned writers are referring to as the “super-scheme”, should be better known than it already is because it’s going to have a big impact in 2021 and beyond.
It gives professional insolvency practitioners additional tools to help protect businesses looking to restructure but with one important new power modelled on the American style “Chapter 11” bankruptcy process.
Whilst an insolvency practitioner does not take an active appointment on the matter, assistance from such professionals, like those at business rescue expert, is key in having these arrangements approved.
It runs parallel to the existing Scheme of Arrangement process, where a court can oversee corporate restructuring efforts without the business having to enter insolvency or be sold as a result. 
Whilst, like a CVA, 75% of creditors in value are required to approve the restructuring plan, if the threshold is not met, dissenting creditors can be legally bound to accept the restructuring plan by the court if it’s found to be fair and equitable to do so. The downside to this however, due to the costs of going to court, is the process is significantly more expensive to implement than a CVA.
If it can be proven that none of the creditors would be any worse off if the plan didn’t go ahead and that the plan is indeed realistic. By worse off, this is often compared to the alternative, which is often the outcome in liquidation or administration, meaning there is a wide discretion for the plan to be approved, but again the involvement of an insolvency practitioner is likely to be needed to make such a certification.
The CIGA Restructuring Plan Application Process
A CIGA restructuring plan can be applied for with or without the use of the new insolvency moratorium
The plan will generally take time to fully implement so the moratorium can provide the necessary breathing space to allow the restructuring plan to be considered. 
Because court hearings are required as well as a creditors meeting, the plan could easily take two to three months to implement, compared to the average of four to six weeks that a CVA would take.
How it works

Crown Preference = CIGA > CVA ?
There's another important calculation that businesses considering restructuring need to take into account - the return of Crown Preference.
We’ve previously written about how HMRC’s newly restored priority in the hierarchy of creditors will cause unintended effects throughout the economy. 
Practically this means that some companies that would previously have been looking at a CVA to restructure their business and readjust course will now have to enter administration or even liquidation in order to satisfy this new aggressive creditor at the expense of others who might have been prepared to back a CVA and would see little return, if any from an insolvency.
As a result of the return of crown preference, HMRC will mop up the first dividends issued under a CVA. With HMRC as an unsecured creditor, all creditors may stand to receive 60p/£ from the arrangement, where with the return of crown preference, HMRC may receive 100p/£, with the remaining unsecured creditors only then receiving 10p/£ after HMRC have been paid in full.
Where this may be too much for creditors to accept under a CVA, if it is realistically the best outcome, the alternative being liquidation, the CIGA restructuring plan would still bind creditors to accept the arrangement, even if they oppose it en-mass.
The good news is that you’ve got a professional friend in your corner at exactly the time you need them. 
Business Rescue Expert provides a free initial consultation for any business to discuss what problems they’re facing right now and how they fix them in the short, medium and long term. 
Get in touch with us to arrange one and we can outline all the options available to make sure that no matter how rough 2020 was, you can begin 2021 with hope.

HMRC Crown Preference
Now this doesn’t refer to the order in which Her Majesty likes cream and jam put on her scones (that’s the correct order btw), but relates to the order in which creditors are paid in insolvencies, specifically where HMRC come in the list.
With the new Finance bill passing, there was a small but important change made to creditor preference which restores HMRC’s standing to be classed as a preferential creditor from 1st December 2020.
This means that after this date any outstanding tax or NIC debt will be paid before floating charge providers such as banks, lenders or suppliers can get any money from the administrators. 
The new legislation has moved HMRC up the queue which will have ramifications for companies considering or going into insolvency. 
R3, the trade body for the insolvency and business restructuring industry have always been firmly against the move. 
Duncan Swift, R3’s past president said: “HMRC’s increased payment from insolvencies has to come from somewhere - and it will come from what’s owed to an insolvent business’s other creditors. 
“Now these creditors will only receive a return once HMRC has been paid in full, it will be much harder to secure their support for rescue plans.
“It’s ironic that this measure, which is being brought in to try and boost the tax take, is likely to reduce the amount of tax collected, as potentially viable companies are not able to be rescued and are forced to close, while growing businesses are less able to tap into the funding they need to invest and expand.”
The last time HMRC enjoyed this status was in 2002 but it was downgraded as part of the Enterprise Act of the same year. 
Chris Horner, Insolvency Director with Business Rescue Expert which has helped many companies manage their HMRC arrears also thinks there will be unintended consequences arising from the move. 
“One thing that could immediately affect all businesses, not just those in insolvency or that owe money already to HMRC, could be the access to finance. 
“Floating charge finance - that’s funds borrowed against assets like stock or work-in-progress - will now come below HMRC from December. 
“That means that this useful and easily accessible type of finance will probably become more expensive and harder to obtain as lenders look to protect themselves from expensive liabilities. 
“For some businesses, this might be the difference between survival and liquidation.”
More companies owe money to HMRC than any other creditor in the UK and the change in legislation will see them becoming more confident and aggressive in looking to reclaim outstanding debts with the additional leverage being given to them. 
If you are behind on any payments then you should get in touch with us today. 
There are several proven strategies and approaches we can help with and use in order to come to a payment arrangement with HMRC. Each can allow a business to continue trading while catching up with their debts but only if they’re executed quickly and properly by professional insolvency practitioners like us. 
If the coronavirus pandemic of 2020 hasn’t been enough of a big dipper for businesses, the return of HMRC preference will guarantee an unpleasant end-of-year surprise for several companies - don’t allow yourself to be one of them. 

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association


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