We reported back in July 2020 on the many help packages issued by the Government to assist businesses and individuals during the COVID-pandemic. You can see that article here.
In this article, amongst other things, we reported that the Corporate Insolvency and Governance Bill received Royal Assent, meaning that it had brought in a number of critical amendments to the Insolvency Act 1986.
- A statutory moratorium process for “eligible companies”;
- A new restructuring plan procedure;
- Invalidating termination clauses in contracts for the supply of goods and services where termination is purportedly triggered by a company facing insolvency;
- For wrongful trading claims, a period between 1 March 2020 and 30 September 2020, which would be ignored by the Courts when assessing the amount sought from a director on the basis of a wrongful trading; and
- Prohibition of winding up petitions being presented.
Most noteworthy, the legislation also included the suspension of winding up petitions, which prohibited such petitions being presented on a statutory demand that had been served between 1 March 2020 and 30 September 2020, unless the creditor could show that (i) the coronavirus had not financial effect on the company or (ii) the relevant grounds would have arisen even if the Coronavirus had not had a financial effect on the company.
This suspension was due to be in December 2020, but has since been extended and is now in effect until at least 31 March 2021.
Whilst the above continues to provide some protection for companies, we urge all directors to review their agreements to see whether or not they have given a personal guarantee in respect of any debts owed by a Company. The Government has not granted any such protection against individuals and bankruptcy petitions can still be presented against directors who have given personal guarantees.
For anyone facing financial difficulties, whether individuals or businesses, it is important to obtain advice at the earliest opportunity. If you or anyone you know is facing financial difficulties or are a creditor equalling facing difficulties due to non-payments, please contact Adina-Leigh Collins or Bimal Kotecha in our insolvency team.