How the new Corporate Insolvency and Governance Act 2020 is designed to support businesses in the current climate
The impact of Covid-19 has been severely damaging for many businesses, including companies which would have otherwise been financially viable. The Corporate Insolvency and Governance Act 2020, which received Royal Assent in June, is designed to offer extra support to these companies, to help them to survive and continue to trade through the crisis.
What is the Corporate Insolvency and Governance Act 2020?
The 2020 Act introduces new support measures for UK companies facing insolvency. It comprises:
- A moratorium, designed to give breathing space and allow companies time to plan their recovery. During the moratorium (which lasts for 20 business days and may be extended further), creditors may not take action against the company for non-payment unless they have permission from the court.
- A Restructuring Plan process, which lets the company undergoing financial difficulties put forward a Restructuring Plan to the court, to be agreed on by creditors. Significantly, the court would have the power to impose the plan on creditors if they did not have a good reason to vote against it.
- Provisions addressing the supply of goods and services to a company going through insolvency procedures. The new rules mean that suppliers must continue to provide goods or services to such companies as long as they are paid for.
- Temporary restrictions on statutory demands and winding-up plans (from 1 March to 30 September 2020) if the unpaid debt is due to the Covid-19 emergency.
- Temporary changes to wrongful trading rules. From 1 March to 30 September 2020, directors do not face personal liability for wrongful trading.
In addition, there are extra measures to allow flexibility in the face of the Covid-19 crisis:
- Annual General Meetings can be postponed or held remotely, until 30 September 2020.
- Filing deadlines for Companies House are temporarily extended.
What does the new Act mean for my company?
The Act is good news for any business facing financial difficulties due to the restrictions put in place in response to Covid-19. For many companies, the reforms in the Act represent a lifeline, making the crucial difference that enables them to survive the crisis.
Company secretaries must familiarise themselves with all aspects of the Act, to ensure that they are taking full advantage of the new support measures. In particular:
- Understand the implications of the Act in their Nation of the UK. Although company law (which covers AGMs and filing deadlines) is “reserved” in England and Wales and in Scotland, some measures of the new Act are devolved in Scotland. Northern Ireland is fully covered by the Act.
- Keep updated on the latest amendments to the Act. For example, some temporary measures may be extended beyond their current cut-off dates.
Get expert advice on the Corporate Insolvency and Governance Act 2020
Bridgehouse has a team of industry experts who can advise you on the steps your company can take in the light of the new Corporate Insolvency and Governance Act. Contact us for more information.