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How Do The Changes to the UK Insolvency Laws Apply to Energy Companies?

As we discussed in our previous blog relating to the Supplier of Last Resort Process, energy company insolvencies bring with them a range of different processes and requirements which other companies do not need to consider.

In particular, the involvement of the Secretary of State and the Gas and Electricity Markets Authority (GEMA) in energy company insolvencies is especially notable. This month, new legislation was introduced to dictate how the Corporate Insolvency and Governance Act 2020 would interact with energy company insolvencies.

On 3 September 2020, The Insolvency (Moratorium) (Special Administration for Energy Licensees) Regulations (SI 2020/943) came into force which make modifications to how the Part A1 moratorium introduced by the Corporate Insolvency and Governance Act 2020 applies to energy companies.

The new regulations mean that directors of energy companies must notify the Secretary of State and GEMA when seeking a Part A1 moratorium, and also when a moratorium is obtained. The directors of the company must also inform the Secretary of State and GEMA about any extension or end of the moratorium.

The regulations also state that even while an energy company is still subject to a Part A1 moratorium, the Secretary of State and GEMA is still able to apply for a special administration order against an energy company.

Part 1A moratoriums also do not prevent GEMA from initiating, carrying out or continuing any legal process in relation to an energy company. Court permission is not required.

Whether we will see instances of energy companies utilising the Part A1 moratorium remains to be seen. However, with the ability of the Secretary of State and GEMA to seek special administration orders regardless, the moratorium may not be providing energy companies with the breathing space that was intended.

This article was co-authored by Rory Thomas.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 260

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