Temporary measures introduced in the Corporate Insolvency and Governance Act 2020 have been extended to the end of June 2021 in a bid to give businesses “breathing space” and allow them to focus on recovery after the pandemic.
The measures, which were intended to protect businesses from aggressive creditor enforcement and to remove personal liability on company directors, include the restriction of statutory demands and winding-up orders.
This means that statutory demands and winding up orders where unpaid debt is because of Covid-19 will be void if served on a company during the “relevant period” (1 March 2020 and 30 June 2021). This extension is aimed at giving businesses the opportunity to reach realistic and fair agreements with all creditors.
Another measure that has been extended means that small suppliers will not have to continue to supply a business in insolvency. However, larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process.
The wrongful trading rules have also been suspended until 30 June 2021, which means that directors cannot be held personally liable if accused of wrongful trading between 1 March 2020 and 30 September 2020.
Commenting on the extension of the measures, a spokesman for the Institute of Directors (IoD) said that it was essential to give company directors the means by which they can sustain inherently viable businesses during the pandemic.
He added that a key factor in this has been the temporary suspension of the potential liability faced by directors if they continue to operate a company that is facing financial difficulties.
For help and advice on matters relating to insolvency, please contact our Insolvency Partner, Tim Close.