UK: Corporate Insolvency and Governance Act 2020: temporary COVID-19 measures extended

By Jordan Cooper, Alex Kelly

10-2020

The UK Government announced on 24 September 2020 that some of the temporary COVID-19 measures within the Corporate Insolvency and Governance Act 2020 (CIGA) will be extended.

The effect of the extension is as follows:

  1. Moratorium on winding up petitions

    CIGA restricts a creditor's use of winding up petitions so that the creditor must have reasonable grounds to believe that covid-19 has not had a financial impact on the company or the grounds for the winding up petition would have applied even if COVID-19 had not had an effect on the company. This was set to expire on 30 September 2020.

    This has been extended until 31 December 2020.

  2. Moratorium on statutory demands

    CIGA prevents the presentation of a winding up petition based on an unpaid statutory demand. This was set to expire on 30 September 2020.

    This has been extended until 31 December 2020.

  3. Supplier termination – small supplier exemption

    CIGA prevents suppliers of goods and services from exercising insolvency related provisions ("ipso facto" clauses) in their contracts as a result of the other party entering into an insolvency process. Small suppliers were exempt from this provision, with that exemption set to expire on 30 September 2020.

    That exemption has been extended until 30 March 2021.

  4. Company procedures

    CIGA relaxed the conditions for annual general and other meetings of qualifying bodies. This was set to expire on 30 September 2020.

    This has been extended until 30 December 2020.

  5. Part A1 moratoriums

    Introduced by CIGA, a Part A1 moratorium can provide a company with breathing space from creditor enforcement to enable it to enact a rescue plan. CIGA introduced temporary rules on aspects of obtaining a Part A1 moratorium to assist companies affected by COVID-19. This included:

    • Waiving the requirement that a company subject to a winding up petition must obtain a court order to obtain a Part A1 moratorium

    • Relaxing the requirement for a monitor's assessment of the likelihood that a Part A1 moratorium will rescue the company as a going concern

    • Relaxing the requirement for a Part A1 moratorium that the company must not have been subject to an insolvency process in the previous 12 months

    • Certain companies carrying on regulated financial activities which would otherwise be ineligible for a moratorium would be eligible

These temporary measures have been extended until 30 March 2021.

There has been no extension to the temporary measure brought in by CIGA relating to the suspension of a director's liability for wrongful trading which expired on 30 September 2020.

If you would like more information on the measures discussed above, including a full discussion of the provisions of the Corporate Insolvency and Governance Act, please see our previous article: UK: Corporate Insolvency and Governance Act 2020 – An overview of the main changes and how companies can use the reforms to their best advantage.