Following on from the government’s initial announcements dating back to 28 March 2020 and the Corporate Insolvency and Governance Act 2020 which, based thereon, came into force on 26 June 2020, a number of protections for businesses contained therein were due to end on 30 September 2020.
In our previous article “New insolvency legislation to protect struggling businesses announced (Corporate Insolvency and Governance Act 2020)” we published a convenient summary of the main provisions of this legislation and in particular its implications on debtors and creditors.
Unfortunately of course we are all too aware that the coronavirus pandemic is still affecting and negatively impacting on all of our lives and the operation of businesses.
Whilst it was expected that the government would extend the measures aimed at protecting businesses, a number of announcements were now made, in particular most recently on 24 September 2020. We have updated our more detailed article with the recent updates which, in summary, confirm that:
- Companies continue to be protected until 31 December 2020 from creditors pursuing insolvency proceedings (suspension of statutory demands and winding-up petitions in circumstances where coronavirus has had a financial effect on the debtor company).
- The new insolvency procedure of a free-standing 20 day (extendable) moratorium is being extended to 30 March 2021 and entry requirements to access this procedure are being eased.
- Termination clauses in supply contracts cannot be exercised but the exemptions (particularly in relation to “small suppliers”), continue until 30 March 2021.
- Provisions in relation to companies being able to hold AGMs by way of virtual meetings have been extended to 30 December 2020.
- The prohibition on forfeiture for non-payment of rent (in business tenancies) has been extended further to 31 December 2020.
- The stay of possession proceedings brought under CPR Part 55 (not including trespass) and enforcement proceedings in relation to orders for possession (warrant or writ of possession) ended on 20 September 2020 and provisions have been introduced to deal with the resumption of possession proceedings, including the requirement of a “reactivation notice” being served (by no later than 29 January 2021) by any landlords whose claims were issued before 3 August 2020.
- The relevant Practice Direction (PD 55C) has also been amended to allow for more than the standard period of eight weeks to pass between issuing of a claim and it being first heard. This exemption is currently set to be in place until 28 March 2021 and appears to address the issue of delays in possession proceedings being anticipated.
- Further restrictions on the exercise of Commercial Rent Arrears Recovery (“CRAR”) have been announced. The implications of the most recent updates on landlords and tenants is also addressed in more detail in our separate article “Protection for Commercial Tenants Extended Again”
One measure that has notably not been extended so far and is due to expire on 30 September 2020 is the suspension of company directors’ personal liability for wrongful trading. Surprisingly, no announcement has been made to confirm the reasoning behind this protective measure coming to an end whilst creditor action (such as insolvency proceedings or forfeiture) continues to be effectively suspended. It may well be that an announcement will follow at short notice.
In any event, our advice throughout has been that the risks to creditors as a result of wrongful trading provisions being suspended were limited to an extent because the provisions in relation to fraudulent trading remained in force, i.e. directors with dishonest intent were not protected by the suspension. Accordingly, we have been advising throughout that directors should remain very careful when considering whether to trade on (whether there is “light at the end of the tunnel”).
With the suspension of the wrongful trading provisions now apparently coming to an end, company directors should take the opportunity to carefully review their company’s circumstances and seek advice at the earliest opportunity should they have any concerns in relation to the company’s continued viability.
For any questions regarding the above article or for further advice, contact the Insolvency & Business Recovery Team by email or by calling 01603 610911.