Reforming Rescue Mechanisms: A Close Examination of Part 26a in the Companies Act 2006

Abstract

A primary focus for governments globally is to strengthen their insolvency framework by introducing a flexible and versatile mechanism to provide maximum aid to financially distressed businesses with limited disruptions to their operations. Such measures would serve as a pillar for economic and financial stability by fortifying efficiency, maximizing creditors’ return, preserving the value of the business, and promoting employment.

The UK has been considered the centre for insolvency and restructuring avenues in the world providing effective insolvency law, an esteemed judiciary, and a hub for business-friendly investment. To strengthen its position amidst the Covid-19 pandemic, the UK introduced reforms under the Corporate Insolvency and Governance Act, 2020 (CIGA). A key reform introduced is the restructuring plan.

The article will examine the effectiveness of the new scheme against the backdrop of existing rescue mechanisms available in the UK. This article will primarily examine the current rescue mechanism and identify the gaps prevalent in the system. Subsequently, the article will identify the measures introduced under CIGA. This will be followed by the need to introduce a new super scheme and its overall effectiveness to achieve the intended purpose of its enactment.

To conclude, this article upholds the notion that a restructuring plan is an efficient instrument in the corporate rescue landscape and provides essential fundamental recommendations to strengthen the plan.