At a Glance
The Corporate Insolvency and Governance Act 2020 (the “Act”) was enacted on 25 June, implementing landmark measures to improve the ability of companies to be efficiently restructured. The Act also included temporary measures to alleviate pressure arising from the COVID-19 crisis. These temporary measures were originally due to expire on 30 September 2020. On 24 September, the government announced that certain of the temporary measures would be extended for either three or six months;1 on 9 December, the government announced a further extension, to 31 March 2021, to those measures that had only been extended for three months in September.2
Adjustments to wrongful trading rules were not extended and expired automatically on 30 September — but were subsequently reinstated for the period 26 November 2020 to 30 April 2021 (inclusive).3
The three core aspects of the Act — i.e., the new restructuring plan procedure, the stand-alone moratorium and restrictions on enforcement of ipso facto clauses — are permanent and broadly unaffected by the extension and reinstatement announcements.4
The temporary measures are designed to provide breathing space during the COVID-19 emergency. Given the crisis is continuing and the UK is in the midst of a second wave of the pandemic, the extension / reinstatement of the measures is no surprise, and offers welcome continued support to UK businesses.
Effect of extension
In essence, the effect of the extension / reinstatement is that:
- directors of most companies5 are not liable, under wrongful trading provisions, for any worsening of a company’s financial position in the periods 1 March to 30 September 2020 and 26 November 2020 to 30 April 2021;
- statutory demands made between 1 March 2020 and 31 March 2021 are void;
- winding-up petitions presented from 27 April 2020 to 31 March 2021 are suspended where a company’s inability to pay is the result of COVID-19;
- restrictions on the court’s jurisdiction to make a winding-up order will apply until 31 March 2021;
- small business suppliers are exempt from the prohibition on enforcement of ipso facto clauses until 30 March 2021;
- until 30 March 2021, certain of the conditions to the commencement of a moratorium are eased;
- landlords are prevented from using commercial rent arrears recovery (CRAR) before 31 March 2021;
- commercial leases cannot be forfeited for non-payment of rent or other sums due between 26 March 2020 and 31 March 2021; and
- the current relaxation of requirements for general meetings, in order to facilitate virtual meetings, continues until 30 March 2021.
For full details, see our detailed deck on the Act, updated to reflect the extensions and reinstatement.
1. Under The Corporate Insolvency and Governance (Coronavirus) (Extension of the Relevant Period) Regulations 2020.↩
2. Under The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No 2) Regulations 2020.↩
3. Under The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020.↩
4. Subject to two small points: the extension of the temporary exemption of small business suppliers from the prohibition on enforcement of ipso facto clauses, and the extension of the temporary easing of conditions to the commencement of a moratorium.↩
5. Notably, the change does not apply to certain excluded companies, including parties to capital markets arrangements.↩