Restructuring & Insolvency
Contents
- Legislation
- News
- Case law
Key contacts
John Jeffreys
Partner | National Head of Restructuring
Graeme Danby
Partner | National Head of Insolvency & Creditor Services
Key anticipated events
January
- A new Practice Statement will apply to schemes of arrangement and restructuring plans
January
2026
Legislation
Employment Rights Act
The Employment Rights Act (ERA) introduces extensive changes to workers’ rights in the UK. Key reforms include making unfair dismissal protection available from six months of employment, banning most ’fire and rehire’ practices, ending exploitative zero-hours contracts, strengthening anti-harassment measures, and making flexible working the default from the outset. The ERA also proposes new rights to sick pay, parental and bereavement leave, and the creation of a ’Fair Work’ enforcement body.
You can read more about the changes proposed in the ERA in the Employment section here.
Whilst the exact final details and timing of the ERA remain uncertain, some measures are expected to be implemented from October 2026. Notably, changes to collective redundancies are unlikely to take effect before 2027.
For Restructuring & Insolvency, the ERA presents several concerns:
- Unfair dismissal: from 1 January 2027, all employees could claim unfair dismissal after six months’ employment (reduced from the current qualifying period of two years), increasing litigation risk and potential liabilities for office holders and buyers, likely reducing bid prices or shifting deal structures. The current cap on the compensatory award for unfair dismissal (the lower of a year’s pay or £118,223) will also be removed
- Fire-and-rehire restrictions / variation of terms: imposing new terms (for example pay and hours) by way of dismissal offer of re-engagement will be automatically unfair except in narrowly defined cases (which includes a narrowly drafted ‘financial distress’ defence in some versions). This will make cost-saving restructurings seeking to change terms, riskier and potentially more expensive
- Collective redundancy consultation: expanded consultation rules and higher protective awards (up to 180 days’ pay) will increase the risk of large restructurings
- TUPE transfers: more employees will have enforceable rights from six months’ service, and buyers’ ability to vary post-transfer terms will be limited, increasing transferred liabilities and potentially deterring buyers from going concern sales, preferring asset purchases, excluding employees
- Insolvency processes: greater exposure to employee claims and stricter rules may lead to office holders being more cautious in contract adoption, preferring asset-only sales, and budgeting higher costs and delays
- Employee claims: the volume and value of tribunal claims will rise, affecting realisations and reducing recoveries for other creditors
Implications for businesses and insolvency professionals
The ERA is set to significantly increase employment-related risks and costs in restructuring and insolvency scenarios.
Actions for businesses and insolvency professionals
Careful planning, due diligence, and risk management will be required on both the insolvency practitioner and buyer side of transactions.
News
The Insolvency Service: Enforcement in Focus for 2026 and Beyond
In July 2025, the Insolvency Service unveiled its Annual Plan 2025 to 2026 (Plan) and Investigations and Enforcement Strategy 2026 to 2031 (Five-Year Strategy), signalling a bold shift from focussing on core insolvency offences such as bankruptcy restriction orders, director disqualification and insolvency related prosecutions, to targeting a much boarder range of financial crime, becoming a proactive, central participant in tackling the prevention of economic crime.
The Plan and Five-Year Strategy suggest the significant shift in the Insolvency Service’s role initially flowed from the new powers and funding model granted to it by the Economic Crime and Corporate Transparency Act 2023. However, more recently, the Autumn Budget 2025 announced that the Government will invest £25 million over the next five years to enable the Insolvency Service, via its new Abusive Phoenixism Taskforce, to investigate suspicious companies and disqualify more rogue company directors.
The Plan focuses on modernising the insolvency regime and strengthening enforcement. Key actions include:
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Legislative reform: to improve debt relief and adopt UNCITRAL model laws
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Enhanced enforcement: against financial wrongdoing such as COVID-19 loan abuse and phoenixism
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Technology upgrades: including the launch of INSSight and investment in AI
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Operational efficiencies: through estate rationalisation and digital transformation
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Workforce investment: in leadership, pay reform, and wellbeing
The Five-Year Strategy sets three objectives:
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enforce the insolvency framework
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uphold the Companies Act; and
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tackle economic crime
It rests on four pillars:
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Powers and capabilities: expanded authority to freeze assets and pursue complex corporate abuse
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Technology and data: AI, analytics, and digital forensics for proactive detection
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Partnerships: deeper collaboration with Companies House, HMRC, and the National Economic Crime Centre
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People: skilled, adaptable teams supported by continuous development
The Five-Year strategy also notes that the Insolvency Service will be reviewing its disqualification framework and live investigations powers to ensure it remains effective and supports its expanding profile.
Implications for businesses
- Broader remit: investigations will target live companies and directors, not just insolvent entities
- Tech-driven enforcement: AI-enabled monitoring will accelerate case detection
- Director accountability: more disqualifications, compensation orders, and education initiatives
Actions for businesses, advisers and insolvency professionals to consider
The Insolvency Service has made its mandate clear that enforcement is a key strategic priority. It wants to be instrumental in tackling economic crime in the UK.
Directors should strengthen governance and internal controls, embrace technology for risk monitoring, invest in continuous education on legal duties and prepare for transparency.
Insolvency office holders should set heightened expectations for investigative rigour, technology adoption, and intelligence sharing. Regulatory scrutiny is likely to increase, with failures to report misconduct attracting consequences. Continuous professional development and robust governance will be essential as cases grow more complex, and enforcement becomes a central pillar of insolvency practice.
Autumn Budget 2025: Key Insights for Directors and Businesses
The recently announced Autumn Budget 2025 (Budget) introduces significant reforms that present both opportunities and risks for businesses. Directors should understand the evolving landscape from a restructuring and insolvency risk perspective and take proactive steps to safeguard their operations.
For further commentary on the Budget, see the Tax section here.
Many businesses face challenges when adjusting their operations, finances, or business models in response to external change, such as new tax rules, regulatory reforms, or shifts in market demand. The Budget amplifies these, by altering tax reliefs, increasing compliance requirements, and introducing sector-specific changes that may impact cash flow and profitability.
Implications for businesses
Lower rates for retail, hospitality, and leisure, but higher rates for valuable properties, means directors must plan for future increases before transitional relief available, tapers off.
The main rate of writing down allowances drops to 14%, but a new 40% first-year allowance for main-rate assets is introduced. Changes to allowance rates may affect investment timing and cash flow.
Mandatory e-invoicing may mean investment in digital systems, posing cost and compliance challenges, especially for smaller enterprises. Albeit plans to introduce mandatory e-invoicing will not take place until April 2029 meaning businesses will have time to consider how they will input this change.
Plans to cap NICs relieve on salary sacrifice to £2,000 per person per year will not come in to play until 2029, giving business breathing space to consider cash flow planning.
The Government targets a £5,600,000,000 reduction in annual administrative burden by the end of Parliament. Reduced administrative burdens, which includes streamlined corporate reporting and regulatory requirements, may free up management time and reduced costs will aid turnaround, but may still require adjustment.
Enhanced enforcement, widened scope of the Company Directors Disqualification Act 1986 and a new Abusive Phoenixism Taskforce targeting directors abusing insolvency processes means that directors must maintain robust governance. Additional funding for Trading Standards and law enforcement will target illegal activity on the high street, with implications for businesses in at-risk sectors.
Actions for businesses and advisers to consider
Reassess, on short and long-term basis, forecasts factoring in new rates, reliefs, and compliance costs
Identify which Budget measures will impact your business model
Model impacts and stress-test for adverse outcomes
Prepare for digitalisation and reporting changes
Ensure robust governance and compliance to avoid increased scrutiny and potential disqualification
Keep lenders, investors, and employees informed
Be alert to early warning signs of distress, particularly when transitional relief expires and new costs emerge and critically, seek professional advice at the earliest sign of financial difficulty.
Directors that take proactive measures and plan strategically will build resilience and mitigate insolvency risks, positioning their businesses to succeed amidst the economic changes that Budget is expected to bring
R3 Association of Business Recovery Publishes Proposal to the Insolvency Service on Creditors’ Voluntary Liquidations (CVLs)
The detailed proposal, which includes proposed amendments to the Insolvency (England and Wales) Rules 2016 (the Insolvency Rules) (Proposal), is designed to address persistent challenges in the approval and payment of liquidators’ fees in CVLs. These changes aim to streamline the process, reduce administrative and cost burdens, and improve outcomes for both insolvency practitioners and creditors.
Statutory fee for CVL liquidators
Central to the Proposal is the introduction of a statutory fee for liquidators in CVLs, initially set at £10,000 plus VAT (subject to future adjustment by the Secretary of State). This fee is intended to cover the essential work undertaken in a standard CVL. The statutory fee does not apply where the CVL arises from an administration under Paragraph 83 of Schedule B1 of the Insolvency Act 1986, or where a liquidator is replaced by one nominated by creditors. Liquidators will retain the ability to seek a change of basis for remuneration under rule 18.20 of the Insolvency Rules and creditors may also challenge the statutory fee under rule 18.25 of the Insolvency Rules.
Other proposed changes to deadlines, fee review and reporting
Other proposals seek to remove the current 18-month deadline for applying to court to fix the basis of fees, providing greater flexibility for both office-holders and creditors, and to allow changes to the rate or amount of fees, not just the method of calculation, and permit retrospective changes with creditor approval. This is intended to address practical issues when a new office-holder is appointed or when circumstances change after the initial fee basis is set. Reporting requirements are also proposed to be updated to reflect the new statutory fee regime, ensuring transparency for creditors.
Implications for insolvency professionals and creditors
If accepted, the changes will reduce the overall costs associated with CVLs, particularly in cases with limited assets, by minimising unnecessary procedural steps and costs. Additionally, the statutory fee regime is likely to improve creditor engagement by simplifying decision-making and clarifying the rights of creditors to challenge fees. However, whilst the outlook of the Proposal looks to be a positive step for the industry, we predict it may take some time not only for the Insolvency Service to consider the Proposal, in light of its ambitious Investigations and Enforcement Strategy 2026 to 2031, but if accepted, to implement changes to legislation.
Case law
Restructuring plans
Government statistics confirm that 2025 saw an increase in sanctioned restructuring plans (under Part 26A of the Companies Act 2006) from the previous year but with numbers remaining relatively low. The majority of those restructuring plans and historically, have been the preserve of larger corporates, with SMEs likely to have been discouraged by complexity and significant cost implications.
Case law and procedural reform
Recent case law and procedural reforms signal a shift towards scrutiny of fairness, enhanced creditor engagement, and improved transparency.
The Court of Appeal decisions in Re Thames Water Utilities Holdings Ltd [2025] EWCA Civ 475 and Saipem SpA & Ors v Petrofac Limited & Anor [2025] EWCA Civ 821, initiated the shift from the earlier, stricter approach towards ‘out-of-the-money’ creditors, to the court’s active, evaluative role in ensuring fair restructuring outcomes for all creditors, including those that would be ‘out-of-the-money’. Both noted the importance of assessing the benefits preserved or generated from the restructuring, looking beyond a quantifiable ‘restructuring surplus’, recognising that benefits could also include intangible benefits.
In Re Waldorf Production UK plc (Waldorf) [2025] EWHC 2181 (Ch) the High Court refused to sanction a plan offering unsecured creditors, including HMRC, only 5% of claims while enabling a solvent sale favouring other stakeholders. The refusal stemmed from the company’s failure to show the plan, particularly the allocation of benefits under it, was fair and equitable. The Judge criticised the lack of early engagement with creditors and stressed the need for fair benefit allocation across classes, even where differential treatment exists, reaffirming the importance of fairness in cross-class cram downs. The company was granted permission for a ‘leapfrog’ appeal to the Supreme Court which may clarify further the principles governing fairness. The Supreme Court appeal was due to be heard on 24-25 February 2026 and was expected to be the first time that the Supreme Court would rule on a restructuring plan. However, the company has confirmed its intention to withdraw the appeal, having filed a further restructuring plan as part of a larger group transaction. The company’s announcement dated 12 December 2025 sets out details of the transaction.
Also worth noting, are the Re Poundland Ltd [2025] EWHC 1822 (Ch) and Re River Island Holdings Limited [2025] EWHC 2276 (Ch) judgments, which both followed guidance set out in the above cases on court discretion, fairness and the distribution of the benefits and burdens among class creditors under the proposed plans.
A new judiciary Practice Statement Companies: Schemes of Arrangement and Restructuring Plans under Parts 26 and 26A of the Companies Act 2006, applies to schemes of arrangement and restructuring plans from 1 January 2026. The changes are designed to regularise the court process and enhance transparency and creditor engagement by requiring:
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Mandatory filing of a claim form and a detailed listing note with indicative timetables before hearing dates are allocated to streamline proceedings
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Early identification of contested issues such as jurisdiction and meeting convening
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That evidence and explanatory statements must be available to creditors at least 14 days before the convening hearing
Predictions for 2026
We anticipate numbers will remain similar to 2025, with the larger corporates dominating the restructuring plan headlines. We expect SME restructuring plans will remain low in number as they continue to face the barrier of costs, but perhaps Sir Alastair Norris’ comments in the Re DSTBTD Limited [2025] EWHC 2366 (Ch) judgment may give the SME market food for thought.
“I conclude with one final observation. It is pleasing to see that the machinery of Part 26A is being successfully used by a small company in evident financial distress, and that the jurisdiction is not the preserve of the large corporation”.
Although it is inevitable that restructuring plans will continue to evolve, with the emphasis currently being on the need for fairness, negotiations and transparency, we expect to see continuing commentary on these points in future judgments and adoption of these requirements by plan companies to mitigate the perception of being ‘unreasonable’ and risking adverse costs. The procedural reforms will require earlier engagement with creditors and more detailed planning to meet new disclosure and timetable requirements. Although they should see improved and timely negotiations, these measures may at times prove impractical, due to the tight timelines and pressures of insolvency.
Key contacts
John Jeffreys
Partner | National Head of Restructuring
Graeme Danby
Partner | National Head of Insolvency & Creditor Services
Other authors
Jacqui Murphy
Associate Director & Knowledge Management Lawyer
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