Extension of Temporary Measures | Corporate Insolvency and Governance Act 2020 Coronavirus
There has been an extension to many of the temporary measures put in place under the Corporate Insolvency and Governance Act 2020 (CIGA), which became law on 26 June 2020.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 came into force on 29 September 2020.
Extension on Measures Preventing Statutory Demands and Winding-Up Petitions
Statutory demands and winding-up petitions by creditors of companies affected by coronavirus (COVID-19) will continue to be restricted until 31st December 2020.
It is important for Companies to use this period of grace to properly evaluate their position and seek advise where necessary.
Equally if the shoe is on the other foot, it important to lay down the groundwork and take preliminary steps necessary to enable quick action once the moratorium on winding up and statutory demands come to an end.
Commercial Landlord and Tenants – Extension of Prohibition of Forfeiture for Non-Payment of Rent
There has been an extension, until 31st December 2020, of the prohibition on commercial landlords' right of re-entry or forfeiture for non-payment of rent. The extension on the prohibition on forfeiture came into effect on 29 September 2020 pursuant to the Business Tenancies (Protection from Forfeiture Relevant Period) (Coronavirus) (England) (No. 2) Regulations 2020.
These two measures will continue to provide breathing space for those businesses affected by COVID-19, particularly in the retail and hospitality sectors.
Directors’ Wrongful Trading Offence Restored
The provisions relating to the suspension of liability for wrongful trading have not been extended and will 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 2020.
Where there is no reasonable prospect of the company avoiding an insolvent liquidation or an insolvent administration, the director has a duty to take every step, which a reasonably diligent person would take, to minimise potential loss to the company's creditors.
If the court deems that a director failed in this duty, the court can order the director to make such personal contribution to the company's assets as it thinks proper.
It is imperative that Boards use this period wisely to prepare for the lifting of these measures.
Company directors need to take stock of their company’s trading position and use this period of grace to seek expert advice and assistance. For assistance, visit us at: https://hallmarksolicitors.co.uk/corporate-rescue-insolvency/.
Call us on: 0800 037 1305.
Disclaimer: Please note that this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this article.