Extension on the Temporary Restrictions on Statutory Demands and Winding Up and Other Measures Under the Corporate Insolvency and Governance Act 2020

Yesterday the Department for Business, Energy and Industrial Strategy announced that certain temporary measures put in place under the Corporate Insolvency and Governance Act 2020 (“CIGA”), which came into force on 26 June, will be extended.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 were laid before the UK Parliament yesterday and will come into force on 29 September 2020. Pursuant to these regulations, statutory demands and winding-up petitions will continue to be restricted until 31 December 2020.

Together with the extension until 31 December 2020 of the prohibition on commercial landlords’ right of re-entry or forfeiture for non-payment of rent announced on 16 September, this will provide further breathing space for those businesses affected by Covid-19 and in particular continue to provide relief in the retail and hospitality sectors. The extension on the prohibition on forfeiture is also to come into effect on 29 September pursuant to the Business Tenancies (Protection from Forfeiture Relevant Period) (Coronavirus) (England) (No. 2) Regulations 2020.

It is important to note that the provisions relating to the suspension of liability for wrongful trading have not been extended under these Regulations and are due to end on 30 September 2020. Therefore directors will again be at risk of personal liability for any wrongful trading claims for the worsening of the company or creditors’ financial position from 1 October.

Other extensions to the temporary measures announced yesterday include:

  • Companies and other qualifying bodies with obligations to hold AGMs have until 30 December 2020 to hold these meetings virtually. Shareholders can continue to examine company papers and vote on important issues remotely;
  • Small suppliers (as defined in CIGA) will remain exempted from the prohibition on reliance of ipso facto clauses until 30 March 2021, and therefore will continue until then to be under no obligation under the terms of their contracts to supply customers facing financial difficulties; and
  • An extension until 30 March 2021 of the temporary provisions relaxing the entry requirements to the new moratorium procedure. It remains to be seen what impact, if any, this will have on the level of uptake on the use of this procedure, which to date has, to our knowledge, been limited to a handful of cases.

These measures were announced on the same day that the Chancellor outlined additional government support in the “Winter Economy Plan”, introducing amongst other measures, the Job Support Scheme which will be introduced from 1 November and replace the current furlough scheme which ends at the end of October, further detail of which will be issued by the government in the coming days and weeks.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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