As you will be aware over the last few months, the Government has introduced a number of schemes and incentives in order to assist individuals and businesses during the COVID-19 pandemic. Some of these measures include:
- The Coronavirus Job Retention Scheme where small and large employers who have furloughed workers will continue to receive 80% of their current salary, up to £2,500. This scheme has been varied in order to permit employees to return to work gradually and shall end in October 2020;
- A deferral of VAT payments for businesses;
- £330 billion worth of Government backed and guaranteed loans to support businesses;
- A business rates holiday which is worth over £9.5 billion to business across the UK;
- Mortgage, rent and credit card payment holidays for individuals;
- Small business grants and grants for retail, hospitality and leisure;
- Creating a moratorium on forfeiture proceedings against commercial tenants who are in rental arrears; and
- More recently, the Corporate Insolvency and Governance Act, which we discuss in more detail below.
Despite the above measures and the lockdown restrictions easing, it is clear that many individuals and businesses are going to suffer greatly as a result of the economic strain brought on by the pandemic. Even the Chancellor has accepted that the Government will not be able to save all businesses. Indeed, we have already witnessed some casualties such as Carluccios, Debenhams, Laura Ashley & very recently, INTU shopping centres although reports suggest that some these organisations were suffering financially prior to the pandemic.
Our insolvency team has already seen an increased number of businesses and individuals who have sought advice relating to their insolvency options. In particular, we have seen an increase of instructions from commercial landlords and tenants in connection with rental arrears and the domino effect it has on their respective businesses.
The Corporate Insolvency and Governance Act 2020
On 25 June 2020, the long awaited Corporate Insolvency and Governance Bill received Royal Asset. This new legislation makes crucial amendments to the Insolvency Act 1986 and the Companies Act 2006. Below we provide a summary of the pertinent amendments:
- A new statutory moratorium process. The new moratorium will be available to “eligible companies” that are set out in Schedule 1 of the Act. This will only be applicable where it is considered likely that a moratorium would result in the company being rescued as a going concern.
- A new restructuring plan procedure. This is procedurally similar to a scheme of arrangement, allowing solvent and insolvent companies to propose a compromise or arrangement to creditors. The principal difference from a scheme is that the court can still sanction a compromise or arrangement even where one or more classes of creditors vote against it.
- Goods and services in context of insolvency proceedings. The Act will invalidate termination clauses in contracts for the supply of goods or services in the context of insolvency proceedings where termination is purportedly triggered by the company facing insolvency.
- Wrongful trading. Courts will ignore the period between 1 March 2020 and 30 September 2020 when assessing the amount sought from a Director as a result of wrongful trading.
- Winding-up petitions. No winding-up petitions can be presented on the basis of a statutory demand served between 1 March 2020 and 30 September 2020 unless the creditor can show that:
- Coronavirus has not had a financial effect on the company; or
- The facts by reference to which the relevant ground applies would have arisen even if Coronavirus had not had a financial effect on the company
For those individuals and businesses facing financial difficulties, it is important that they receive the appropriate advice at the earliest opportunity. This includes obtaining legal advice and assistance where there are insolvency proceedings (or even the threat of insolvency proceedings) on foot.
Bearing in mind the current circumstances, our insolvency team are providing a free 30 minutes telephone consultation to any individuals or businesses who are currently facing insolvency related legal proceedings. This is available until 31 July 2020. If you think any of your clients will benefit from insolvency legal advice, please feel free to put them in touch with us.