More breathing space for businesses

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020

In light of the concern over the ‘second wave’ and the ongoing impact on the UK economy, the government has now introduced The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (Regulations) in order to prolong the ‘relevant period’ within certain temporary provisions in the Corporate Insolvency and Governance Act 2020 (CIGA), in an attempt to mitigate the effect of coronavirus. The current ‘relevant period’ ends on 30 September 2020.

Regulation 2 of the Regulations has amended certain provisions in the CIGA to change the date upon which the ‘relevant period’ ends for certain temporary modifications. These are set out below:

1. Termination clauses in supply contracts - paragraph 2(a)

Pursuant to the CIGA, if a termination clause in a contract for the supply of goods and services is triggered on an insolvency event, that term has no effect. Section 15 of the CIGA temporarily excluded small suppliers from these provisions during the ‘relevant period’ which was from 25 June 2020 until 30 September 2020.

Paragraph 2(a) of regulation 2 extends the ‘relevant period’ in which small suppliers are excluded from the termination provisions until 30 March 2021.

2. Moratoriums - paragraph 2(b)

The CIGA introduced a moratorium to provide struggling businesses with protection from recovery action by creditors providing them with breathing space in which to explore rescue and restructuring options.

Schedule 4 to the CIGA contains temporary rules that apply to moratoriums. Part 3 of Schedule 4 to the CIGA sets out what is required in terms of notices and statements when a moratorium is applied for or is extended or ended as well as other more general matters. These rules apply during the ‘relevant period’ which is from 25 June 2020 until 30 September 2020.

Paragraph 2(b) of regulation 2 extends the ‘relevant period’ in which these temporary rules apply to 30 March 2021.

3. Winding up petitions - paragraph 3

Schedule 10 to the CIGA contains temporary rules restricting the presentation of winding up petitions and the making of winding up orders against companies between 27 April 2020 to 30 September 2020.

Paragraph 3 of regulation 2 extends the ‘relevant period’ to which the temporary rules apply from 30 September 2020 to 31 December 2020.

4. Company meetings - paragraph 4

Schedule 14 to the CIGA deals with the meetings of ‘qualified bodies’ held during the ‘relevant period’. The ‘relevant period’ for these provisions was between 26 March 2020 and 30 September 2020.

Paragraph 4 of regulation 2 extends the ‘relevant period’ to end on 30 December 2020.

This applies only in relation to:

• A building society within the meaning of the Building Societies Act 1986(3)
• A society that is registered within the meaning of the Friendly Societies Act 1974(4) or incorporated under the Friendly Societies Act 1992(5)
• A registered branch within the meaning of the Friendly Societies Act 1992
• A company within the meaning of section 1(1) of the Companies Act 2006(6)
• A charitable incorporated organisation within the meaning of Part 11 of the Charities Act2011(7)
• A registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014(8)

The above is only intended to be a short note on the extended periods. If you have any queries regarding the application of the CIGA on your business, please do not hesitate to contact Paul Spence, Peter Speight or Chris Parry.

For further updates and other articles discussing the impact of the coronavirus please view our coronavirus hub.