+44 (0)20 7404 0606
Breathing space for business extended to Spring 2021 - Corporate Insolvency and Governance Act - what has changed?
- AuthorJonathan Cole
The Corporate Insolvency and Governance Act 2020 (CIGA) came into force on 26 June 2020. An overview of some of the main provisions of CIGA can be found here.
CIGA was fast-tracked through parliament in order to respond to the COVID-19 pandemic and introduced a number of temporary provisions, which were intended to provide relief and breathing space to many struggling UK businesses.
Corporate Insolvency and Governance Act - what has changed?
In light of the ongoing pandemic, the Government has now announced various extensions to the deadlines for these temporary provisions and specifically in relation to those described below:
- A new time period for the suspension of the wrongful trading laws, to cover the period 26 November 2020 to 30 April 2021.
- An extension to the deadline for the expiration of the prohibition on the service of statutory demands and winding-up petitions, until midnight on 30 March 2021; and
- An extension to the temporary provisions regarding company meetings to 30 March 2021.
Temporary insolvency provisions
- A temporary suspension of directors’ liability for wrongful trading.
This requires the courts to assume that a director is not responsible for any worsening of the company’s financial position, to the detriment of the company’s creditors. This was intended to apply to the period 1 March to 30 September 2020 and expired on this later date.
- A temporary prohibition on the service of statutory demands and winding up petitions.
These restrictions prevent a creditor from issuing a winding up petition against a company if it is in reliance of an unpaid statutory demands served from served from 1 March 2020, unless there are reasonable grounds for believing that: (a) the pandemic has not had a financial affect on the company; and/or (b) the company would not have been able to pay the debts regardless of the financial impact of the pandemic. This temporary prohibition was due to expire on 31 December 2020.
- Relaxation of various company requirements, including the adjournment or delay in holding shareholder meetings.
These were intended to mitigate the impact of the pandemic on the ability of UK companies to practice in an ordinary way and to prevent unfair criticism of directors or company management for failing to comply with company law. These extensions were also due to expire on 31 December 2020.
It remains to be seen as to whether the revised deadlines will be extended further into 2021, so watch this space …
If you require any further information or advice regarding the Corporate Insolvency and Governance Act 2020, please contact Jonathan Cole of our Commercial Dispute Resolution team at firstname.lastname@example.org.
Please note that the deadlines set out in this note are relevant and applicable as at 11 December 2020.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.