Government gives businesses much-needed breathing space with extension of insolvency measuresPosted: Sep 25, 2020

UPDATED 26 NOVEMBER 2020

The Government has announced extensions to previous temporary measures relating to insolvency matters.

A raft of changes to protect businesses from insolvency were introduced in the Corporate Insolvency and Governance Act and were due to expire on 30 September 2020. The temporary measures include:

• companies and other qualifying bodies with obligations to hold AGMs will continue to have the flexibility to hold these meetings virtually until 30 December 2020. This means that shareholders can continue to examine company papers and vote on important issues remotely. 
• statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus related debts. 
• termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary. 
• the modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021.
• The provisions relating to the suspension of wrongful trading in Section 12 of the CIGA 2020 have not been extended. This means that directors can be found liable for wrongful trading in respect of conduct after 30 September 2020 where the company subsequently enters liquidation or administration. This will make planning extremely challenging for directors as lockdown measures continue and the future for many businesses remains uncertain. UPDATED - It has recently been announced 26 November 2020 that the suspension of wrongful trading has been extended again from 26 November 2020 to 30 April 2021. 

These are an important extension to helps businesses and directors through the current crisis.

If things are looking like it’s going to be a really rough time and you think you could be facing insolvency, then talk to us. The first consultation is free and whether it results in comforting reassurance, a rescue plan or an insolvency process, the sooner we start, the better your result will be.