Corporate Governance and Insolvency Act 2020
This new piece of legislation which received Royal Assent on 25 June 2020 and the provisions it contains provide an extension to the deadline for filing accounts and certain other documents at Companies House.
As well as these measures the Act also included a temporary move allowing greater flexibility for the holding of company meetings that would be relevant for those charities that are registered companies and charitable incorporated organisations, allowing for meetings to be held virtually and providing an extension to the period for holding an annual general meeting. These provisions were originally due to lapse on 30 September 2020, but with the effects of the COVID-19 pandemic still being felt and with social distancing measures still in place they have now been extended to 30 December 2020.
The Act also took the opportunity to amend the law relating to insolvency, introducing a new process known as a moratorium, aimed at providing breathing space for otherwise well run businesses that find themselves in financial difficulty. The process will also apply to charities that are incorporated as limited companies or Charitable Incorporated Organisations (CIOs). The moratorium provides protection from creditors for an initial 20 business day period during which time the company has an opportunity to restructure its finances and place it on a more stable footing. The moratorium is designed to be a light touch process that allows the directors to continue to run the business, monitored by an insolvency practitioner who is responsible for guiding the charitable company through the process. If it becomes clear to the monitor though that the charitable company cannot be saved or the charitable company is failing to pay its debts during the moratorium process the monitor can bring the process to an end. If necessary the moratorium period can be extended for a further 20 business day period to allow for more time to complete any necessary restructuring, although any further extension beyond this will generally require the consent of creditors or an application to the Court.
This is not a short-term measure introduced to help businesses affected by the pandemic (although undoubtedly it could prove helpful for many businesses that are struggling at this time) but is a permanent move. The Act did contain several short-term measures though, such as the temporary suspension of wrongful trading provisions, allowing the courts to assume that directors were not responsible for the worsening of a company’s finances during the period 1 March to 30 September 2020. There was also temporary relief from statutory demands and winding up orders until 30 September, which has now been extended to 31 December 2020 due to the continuing impact of the pandemic.