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Insolvency law update
- AuthorGraeme Weir
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020
You may recall that the Government passed an Act in Parliament in June 2020 to support businesses in addressing the challenges arising from the impact of Covid 19.
The Act’s three main purposes were:-
- To introduce new corporate restructuring tools affording companies the breathing space and mechanisms to enhance their prospects of survival.
- To temporarily suspend elements of insolvency law to support directors who continue to trade through the emergency period without the potential threat of any personal liability for “wrongful trading”. It also sought to temporarily protect businesses from the threat of creditors seeking to initiate insolvency proceedings, to recover monies owed to them.
- Company law and other legislation will be amended to afford businesses respite from their obligation to file documents and arrange Annual General meetings as appropriate.
The Moratoriums in place to afford such protection have recently been extended under the new Regulations listed in the heading and which came into force on 29th September 2020.
Accordingly two of the key points to note are :
When a company becomes subject to insolvency procedures, such as Administration or Receivership, the following types of clause or conduct would cease to have effect (under a new s233B of The Insolvency Act) up until 30th March 2021
Any term seeking or allowing the termination of the contract or supply because the company becomes subject to such insolvency procedure;
A supplier cannot demand payment of outstanding pre-insolvency charges as a condition of continuing its supply.
Under Schedule 10 no petition for the winding up of a company may be presented under S124 of the Insolvency Act 1986 where a Statutory Demand was served between the period of 1st March 2020 and now extending to 31st December 2020.
These regulations will therefore impact on Suppliers and Creditors and those companies continuing to struggle during Covid alike. Should you like to discuss any matters arising please do not hesitate to contact our Head of Litigation Daniel Crook via DBC@kingsfords.net, or Graeme Weir a Consultant in our Litigation Department via GJW@kingsfords.net or by telephone on 01233 624545.