Government announces extension of insolvency measures

Government announces extension of insolvency measures

On 24 September, the Government extended the measures put in place by the Corporate Insolvency and Governance Act in order to continue to support and relieve pressure for businesses affected by Coronavirus.

A number of the measures in force under this emergency insolvency legislation were due to expire on 30 September 2020 and have now been extended to the end of December 2020 and in some cases to March 2021.

The temporary measures include:

• Those companies with obligations to hold AGMs will continue to have the flexibility to hold them virtually until 30 December 2020.
• The restriction on statutory demands and winding up petitions will remain until 31 December 2020, to protect businesses from aggressive creditor enforcement action.
• Termination clauses will still be prohibited, stopping creditors from ceasing their supply or asking for additional payments from a company undergoing a rescue process.
• The temporary moratorium rules will be extended to 30 March 2021.
  • Companies subject to a winding up petition can access a moratorium by submitting papers to Court rather than having to make a Court Application.
  • Companies which have been in a CVA or Administration within the last 12 months can obtain a moratorium (previously this was not allowed).

A key measure of the Corporate Insolvency and Governance Act that will not be extended beyond the 30 September 2020 is the relaxation of Wrongful Trading provisions against company Directors.

The lack of extended protection from wrongful trading is a clear message from government that company directors now need to be confident that they have good plan in place for a viable business if they choose to continue to trade, regardless of the many uncertainties business continue to face. Directors are at risk of being found to be personally accountable should it be found that continued trading worsens the position for creditors when they should have known that business failure was inevitable. It is also a clear statement of intent that the government will do all it can to recover CBILs or BBLs monies paid to companies which the directors knew (or ought to have known) were trading insolvently. It comes on the back of a recent government reminder to Insolvency Practitioners that they need to look closely at what the directors of a company knew at the time of taking out a government backed business loan and how they have deployed the funds.

The Government’s full announcement can be found here.

If you have any questions in relation to this briefing, please get in touch with your usual contact or a member of the Restructuring and Insolvency team.