Insights

Revisions to insolvency laws due to Covid-19

By RJP LLP on 17 August 2020

The Corporate Insolvency and Governance Bill received royal assent on 25 June 2020 and is now an Act. It was introduced to help businesses struggling with the impact of Covid-19 and includes a series of measures to amend insolvency and company law, helping them through this period of instability. The corporate governance measures will also introduce temporary easements and flexibility to businesses where they are coping with reduced resources and restrictions.

The measures in the Bill will support businesses, and where applicable charities and mutual societies. Here are all the details:

Features of the new Insolvency Bill

The key features of the new Bill include:

A new moratorium to give companies breathing space from creditors while they seek a rescue;
Prohibiting the use of termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process;
Availability of new restructuring tools to make the insolvency regime more flexible and give businesses greater chances of survival.

Very importantly for small business owners, the new bill also features the following new clauses which can be applied retrospectively to be as effective as possible:

Temporarily prohibiting creditors from filing statutory demands and winding up petitions for coronavirus related debts;
Temporarily easing burdens on businesses by enabling them to hold closed Annual General Meetings (AGMs), conduct business and communicate with members electronically.

In addition, under the secondary legislation which came into force on 27 June 2020, companies and LLPs will receive an automatic extension to filing deadlines for the following:

confirmation statements;
registrations of charges (mortgage);
event-driven filings, such as a change to your company’s directors or people with significant control and filing of accounts.

For example:

Deadlines for filing accounts have been extended by three months - to 12 months for private companies and LLPs and nine months for public companies;

The 14 day deadline for the annual confirmation statement after the end of the company’s year-long confirmation period has been extended to 42 days;

The 14 day deadlines for submitting notices of relevant events after they occur are extended to 42 days - this includes a change of director or person of significant control;

The 21 day deadline for registering a charge against a company’s assets has been extended by ten days to 31 days.

All these deadlines will be updated automatically and will not need to be applied for.

It is important to note that these are all temporary measures and the deadlines will not be extended next year if they fall on or after 6 April 2021.