UK Government extends Coronavirus provisions under the Corporate Insolvency and Governance Act 2020
From 29 September 2020, the Corporate Insolvency and Governance Act 2020 (“CIGA”) has been amended to prolong the “relevant period” within certain areas in order to continue the Government’s attempt to support businesses affected by the COVID-19 pandemic.
The temporary rules around moratoriums are extended to 30 March 2021. Companies that have been subject to insolvency proceedings in the preceding 12 months are still eligible for a moratorium. Companies that are subject to an outstanding winding-up petition can continue to obtain a moratorium by submitting papers to court rather than making an application to the court.
2. Winding-up Petitions and Statutory Demands
Statutory demands served between 1 March 2020 and 31 December 2020 will be ineffective and cannot form the basis of a winding-up petition presented at any point after 27 April 2020. Although there is no blanket ban on presenting winding-up petitions, creditors are advised not to present such petitions unless they have reasonable grounds to believe that (a) COVID-19 has not had a financial effect on the company; or (b) that the relevant ground would apply even if COVID-19 had not had a financial effect on the company.
3. Meetings of Companies
Companies required to hold Annual General Meetings are able to hold them virtually until 30 December 2020.
CIGA also provides that any general meetings (including an AGM) or class meeting of a company held between 26 March 2020 and 30 December 2020:
a. need not be held at any particular place;
b. may be held, and any votes may be permitted to be cast, by electronic means or any other means; and
c. may be held without any number of those participating in the meeting being together at the same place.
One measure of CIGA that has not been extended beyond 30 September 2020 is the suspension of liability for wrongful trading. To remind you, CIGA suspended a director’s liability for wrongful trading if their company was COVID-insolvent. This sends a clear message that directors must be confident that their business plans are viable if they choose to continue trading and the intention to recover Coronavirus Bounce Bank Loans and monies paid to companies whose directors knew (or ought to have known) they were trading insolvently.
The new regulations can be found at this link.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.