On 20 May, the government introduced the Corporate Governance and Insolvency Bill, which will introduce a number of measures to combat the challenges of the impact of the Coronavirus pandemic on insolvency and company law.
The Bill comprises two corporate governance and six insolvency measures, as follows:
- Introducing a new moratorium, for 20 business days (extendable to 40 business days), to give companies breathing space from their creditors, who will not be able to pursue legal action whilst a rescue plan is actioned. The process must be monitored by an insolvency practitioner, but the company will remain under the control of the directors.
- Ensuring companies going through a rescue process continue to receive supplies, by prohibiting the use of termination clauses by suppliers. This is subject to safeguards for suppliers facing hardship and there is a temporary exemption for small firms during the current Coronavirus pandemic. The customer is required to pay for supplies received when the insolvency process is put in place but not for past supplies.
- Introducing a new restructuring plan that will bind creditors to it (even dissenting ones) providing that the courts view is that it is fair and equitable.
- Removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the current emergency (the trading period between 1 March and 30 June 2020).
- Temporarily prohibiting creditors from filing statutory demands and winding-up petitions for Coronavirus-related debts to prevent otherwise viable companies being targeted by aggressive creditor action.
- Temporarily easing burdens on businesses by enabling them to hold closed AGMs, conduct business and communicate with members electronically, and by extending filing deadlines for accounts, confirmation statements and registration of charges.
- Allowing for the temporary measures to be retrospective from their respective dates of announcement so as to provide as much relief to business as possible.
You can read more about the measures at www.gov.uk/government/news/government-introduces-legislation-to-relieve-burden-on-businesses-and-support-economic-recovery.
Should you require any advice on these measures and how they impact your business, please contact your usual Saffery Champness partner.