Earlier this year, we reported on the Corporate Insolvency and Governance Bill 2020 (CIGA 2020). This article can be found here. CIGA 2020 made critical changes to the Insolvency Act 1986 and the Companies Act 2006 in light of the COVID-19 pandemic to help companies.
With lockdown measures increasing once again, on 24 September 2020, the Government put forward the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (“The Regulations”). The Regulations will come into force on 29 September 2020, and will extend some of the protection for struggling businesses and companies beyond the original deadline, which was 30 September 2020.
In summary, the Regulations provide as follows:
- The temporary suspension on filing statutory demands and winding up petitions for COVID-19 related debts is extended from 30 September 2020 to 31 December 2020
- The prohibition against relying on termination clauses will extend to 30 March 2021
- The new statutory moratorium procedure will be extended until 30 March 2021
It is interesting to note that the Regulations will not extend the suspension of liability for wrongful trading beyond 30 September 2020.
No doubt the above will come as a relief to those with businesses struggling through the current pandemic and the resulting economic fall out, but in turn, this could have a significant impact on creditors who may start to struggle with their own cash flow as a result. A statutory demand is often the easiest and quickest way to place immediate pressure on a debtor to pay an undisputed, outstanding debt. Whilst pursuing a debt by way of Court proceedings has not been suspended, it is not always the most cost effective route and is unlikely to produce any quick results for a creditor.
For those individuals and businesses facing financial difficulties, it is important to receive the appropriate advice at the earliest opportunity and our insolvency team are on hand to assist. For more information, please contact Adina-Leigh Collins or Bimal Kotecha.