A new Corporate Insolvency and Governance Bill, introduced on 20 May, will amend insolvency and company law to support businesses in distress from the impact of the COVID-19 pandemic.
The Bill, to be fast-tracked through Parliament, includes some measures which have been previously announced, but are now being enshrined in law. The aim is to provide businesses with the flexibility and breathing space they need to continue trading during the current crisis. Three key measures are a moratorium period, protection from legal action against Covid-19 debts and relaxation of AGM and statutory accounts requirements.
The introduction of a new moratorium period will give companies a 20-business day breathing space from their creditors to explore rescue options. This can be extended to 40 business days, with further extensions at the agreement of creditors or the court.
The company will remain under the control of its directors during the moratorium, although the process will be overseen by a licensed insolvency practitioner.
Covid-19 related debts
Temporary measures will prevent aggressive creditor action against otherwise viable companies struggling because of COVID-19.
Although commercial landlords have been prevented from enforcing the forfeiture of leases for unpaid rent, some landlords have resorted to other measures.
There is a temporary relaxation of the wrongful trading rules so that directors can continue trading through the crisis without the threat of legal action. This measure will run from 1 March to 30 June.
Meetings and filing requirements
Backdated to 26 March, a company that has held an AGM adhering to social distancing measures, but not meeting the company’s constitution, will be treated as having complied with the law. If a company has been forced to postpone an AGM after 26 March, they will be allowed to hold the meeting (socially distanced if necessary) up to the end of September.
Companies House has already said that companies can apply for an automatic three-month extension to file statutory accounts, and the Bill adds automatic extensions for confirmation statements and changes of details.
The Corporate Insolvency and Governance Bill received royal assent on 25 June and is now an Act.