As the result of the economic crisis caused by the Covid19 pandemic, the Government has introduced, at considerable speed, measures of both a permanent and temporary nature designed to assist financially distressed companies.
These measures are contained within the UK Corporate Insolvency and Governance Act 2020 (‘the Act’) which received Royal Assent on 25 June 2020.
The Act introduces temporary measures aimed at assisting companies engaged in insolvency and restructuring and to assist directors of businesses financially struggling as the result of trading problems caused by the pandemic.
The Act also provides time extensions for the filing of certain documents at Companies House, including company accounts.
Tim Thompson of Kangs Solicitors provides a brief overview of the changes.
The Permanent Changes | Kangs Insolvency Solicitors
The three main changes are:
- New moratorium provisions.
Companies struggling to pay their debts will receive a period of time in which to explore rescue and restructuring options and there is provision restricting recovery action by creditors. Companies will now be permitted to apply for a twenty day moratorium period, which can be extended up to twelve months with creditor consent.
- A ban on ipso facto clauses.
Clauses inserted into contracts providing supplier termination rights upon insolvency are now banned.
- New Restrictions on termination of contracts.
Suppliers must continue to supply an ailing customer even after it has commenced an insolvency or restructuring procedure.
The Temporary Changes | Kangs Company Insolvency Solicitors
The temporary changes include:
- Restrictions on using winding-up petitions and statutory demands.
Creditors will be restricted from issuing winding up petitions and statutory demands upon companies where it can evidence that the company’s trading has been detrimentally affected by the downfall in trade created by COVID19.
- Suspension in respect of the wrongful trading regime.
Greater onus is placed upon a Court to find that a particular director is not responsible for the financial failings of the company which has caused detriment to its creditors in proceedings where the integrity of that director falls into consideration. This will only apply to those actions of the director during to the period 1 March 2020 to 30 September 2020.
- Relaxation of Companies House filing requirements.
Public companies have been granted more time in which to file Annual Accounts and Reports. The Secretary of State has received powers to temporarily grant further extensions should it become appropriate.
How Can We Help? | Kangs Civil and Criminal Corporate Defence Solicitors
The team at Kangs Solicitors is led by Hamraj Kang, ranked as a ‘star individual’ in Chambers UK for five consecutive years for his work in defending financial crime cases.
We are here to assist and happy to provide an initial no obligation consultation at our offices in London, Birmingham and Manchester or by telephone/video conferencing.