The Corporate Insolvency and Governance Act 2020 came into force on 26 June 2020 introducing a number of temporary and more permanent reforms, summarised in my colleague Jess’ post here. The overarching objective of these measures is to support businesses during the pandemic and maximise their chances of survival, protect jobs and support the country’s economic recovery, and prohibit many enforcement actions otherwise open to creditors.
A number of these measures were due to expire on 30 September 2020. However, with the R number increasing, today (24 September), the Government have again showed their support for businesses announcing that:
· Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020.
· While permanent changes were introduced to invalidate termination clauses in supplier contracts stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process, small suppliers will remain exempt from the obligation to supply until 30 March 2021.
· Modifications to the new moratorium procedure, relaxing the entry requirements to it, will also be extended until 30 March 2021. A company may now 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.
· 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.
Whilst beneficial for businesses, the above measures may place further strain on the supply chain (see my colleague Francesca’s comments on this here) and will no doubt have a wider impact on creditors as a whole, with limited avenues for enforcement.
We await further guidance in respect of the full implementation of the above. However, the message from Business Minister Lord Callanan is clear. Businesses must: "Plan, adapt and build back better”.
Government gives businesses much-needed breathing space with extension of insolvency measures