New legislation aimed at helping companies survive the coronavirus pandemic
The UK government recently published its Corporate Insolvency and Governance Bill which had its first reading in Parliament on 20 May 2020. The Bill aims to help companies maximise their chances of survival of this pandemic, protect jobs and support the UK’s economy overall. The legislation is expected to be fast-tracked through Parliament and implemented into law quickly.
Whilst some of the measures contained in the Bill have been on the horizon for a while, others have been introduced primarily to cater for the current pandemic. The key measures included in the Bill are as follows:
Corporate entities as well as charitable organisations will be permitted to hold meetings in ways aligned with the current social distancing rules (updated government guidance can be found here). These measures will be in place retrospectively for the ‘relevant period’ (from 26 March 2020 until 30 September 2020) with the government having the option to extend the date until 5 April 2021.
During the relevant period, it will be permissible:
- for members meetings to be held and votes cast by electronic means, regardless of what is stipulated in the entities’ constitution; and
- If the constitution requires that an AGM ought to be held on a date which falls within the relevant period, the meeting can be postponed until 30 September 2020.
Companies struggling to continue to trade and likely to become insolvent as a result can obtain a 20 business day moratorium period which will allow viable businesses time to restructure or find new investment.
To obtain this, the directors of the company will need to make a statement that the company is unable to pay its debts and that a moratorium for the company would allow it to be rescued as a going concern.
The directors will be able to extend the initial 20 business day moratorium for an additional 20 business days if they file a notice and accompanying documents at court. Any extension of the moratorium beyond 40 business days will require the consent of the creditors or the court.
Supplier termination clauses
The Bill will prohibit all suppliers from stopping supplies by reason of the company’s insolvency if the supplies continue to be paid for. The Bill will also prevent suppliers from amending the contractual terms allowing them to increase payments.
Companies House filing requirements
Extensions of time have already been offered to companies but the Bill allows the Secretary of State to temporarily make further extensions to deadlines. The extended period for the requisite filing must not exceed:
- 42 days, in cases where the existing period is 21 days or less, and
- 12 months, in cases where the existing period is for maximum of 3.6 or even 9 months.
We think this Bill will be welcomed by corporate entities in the UK. It will assist companies (and charitable organisations) in maximising their chances of survival of the economic uncertainty brought about by the coronavirus pandemic as well as assisting in protecting the UK economy.
For further information or advice on how to conduct your own coronavirus contract review, please contact our Commercial Team on 01733 882800 or email [email protected].
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