The Corporate Insolvency and Governance Act 2020 (the Act) came into force on 26th June 2020. As highlighted in our article at the time, it was designed to help businesses in difficulty that needed to restructure, to increase their chances of survival during these turbulent times.
The Act contained a number of provisions – some were permanent, while some were only temporary but designed to deal with the ever-changing issues that were thrown up by the pandemic. Given the continuing challenges, these temporary measures have been extended a number of times over the last few months, including the suspension of liability for Wrongful Trading, which our legal team commented on in back in November.
While there is now some light at the end of the tunnel – with vaccines being rolled out nationwide (and worldwide) and the government giving us a roadmap out of lockdown – many UK businesses are still finding life incredibly difficult. In order to address this, the government sought to extend the duration of those temporary measures in parliament last week. The proposals were accepted and became effective on 26th March.
Technically the legislation gives the government the flexibility to make changes to these temporary measures as far into the future as 29th April 2022 however they have currently only extended them by a few months. There is more detail about the measures in our earlier article but here is a summary of what has changed:
- The suspension of Wrongful Trading continues until 30th June 2021 which will give further comfort to directors trying to run businesses during these hugely uncertain times (although other general duties remain in force)
- The ability of creditors to issue Winding Up Petitions and Statutory Demands continues to be restricted until 30th June 2021 thereby giving protection from creditor enforcement action
- Small companies remain exempt from being obliged to continue making supplies under what are known as “Ipso facto” clauses
Additionally, modifications that were made to the new moratorium procedure (brought in as a permanent measure in the original Act) – which relaxed the entry requirements – have been extended to 30th September 2021. In a change to the original legislation, it is now possible for a company to enter a moratorium even if they have been through an insolvency process in the previous 12 months.
As a final, but equally welcome point – earlier in March the law restricting a landlord’s ability to forfeit a lease for non-payment of rent was further extended to 30th June 2021. By changing the date in this legislation, these regulations automatically extend the restrictions on the use of commercial rent arrears recovery (CRAR) to take possession of goods.
In conclusion, these don’t really change things much, but they do offer further much-needed breathing space for business owners as we begin to come out of lockdown. It is important to remember though, that in spite of these measures, directors still need to be aware that their duties to act in the interests of all those involved with their companies continues – and we expect to see a high degree of scrutiny from HMRC, lenders and creditors with reference to the stewardship of companies.
As always, we’re here to help you and your clients on any of the issues thrown up by Covid. If you feel any of our team of specialists can help then please get in touch.