An update on the Corporate Insolvency & Governance Act 2020 (“CIGA 2020”)
CIGA 2020 received Royal Assent on 25th June 2020 and consists of permanent measures to update the current UK insolvency regime and several temporary measures aimed at giving struggling businesses a lifeline during the fallout of the COVID-19 pandemic.
Since the date of writing this Article, on 24th March 2021 the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Certain Relevant Periods) Regulations (Northern Ireland) 2021 were made and come into force on 29th March 2021.
The regulations that extend to 30 June 2021 are the;
- Temporary exclusion of small suppliers from prohibition on enforcement of ipso facto clauses; and
- Temporary restrictions on presentation of winding up petitions.
The temporary changes introduced by the Act only apply during the period of the Covid-19 crisis. Initially this period was to apply retrospectively from 1st March 2020 up to 31st December 2020, however in September 2020, due to Coronavirus restrictions remaining in place, the Government announced the extension of some of these temporary measures until March 2021 and April 2021.
The temporary insolvency measures contained in the Act aim to support businesses during the pandemic and help avoid insolvency. The new temporary measures are:
Suspension of serving statutory demands and restrictions on winding-up petitions where unpaid debt is due to Covid-19
Statutory demands will be void if served on a company during the “relevant period” (between 1 March 2020 and 31 March 2021).
Winding-up petitions presented during the “relevant period” on the basis that a company is unable to pay its debts, will be reviewed by the court to determine the cause of non-payment. Where the unpaid debt is due to Covid-19, no winding up order will be made.
Suspension of the wrongful trading rules
In respect of the period 1 March 2020 to 30 September 2020, the Act temporarily removes the threat of personal liability for wrongful trading from directors (all other checks and balances on directors remain in place). The measure expired on 30 September 2020. However, new regulations, the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020, have revived this relief from personal liability for wrongful trading. A suspension now also applies for the period 26 November 2020 to 30 April 2021.
To date, the above temporary measures have not been extended beyond the current time periods noted however given current Government restrictions remain in place, it is very likely that these will be extended.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.