News

CORONAVIRUS: An Update on the CJRS and Insolvency

Job Retention Scheme - UPDATE

The Government guidance has been updated to confirm that employee authorised salary deductions can be made from grant payments.

Insolvency Rules - UPDATE

The Corporate Governance and Insolvency Bill is now going through Parliament which will introduce a series of amendments to insolvency and company law in response to the coronavirus outbreak.

The Act will introduce a moratorium which will give companies breathing space from their creditors while they seek a rescue. The company will remain under the control of its directors but the process will be overseen by a licensed insolvency practitioner. The business will have 20 (extendable to 40) business days to consider a rescue plan. This period can be extended with the agreement of creditors or the Court.

There will also be a change to the use of termination clauses in supply contracts - it will no longer be possible for a supplier to rely on contractual terms to stop supplying, or vary the contract terms (such as price) with the company, where a company has entered an insolvency or restructuring procedure or obtains a moratorium during this period of crisis. However, this will not apply to financial contracts or to financial services firms.

The business will have to pay for supplies received after the start of the insolvency process but will not be required to clear debts that predate this while it is arranging its rescue plan. However, there will be exemptions to the requirement to continue to supply the company, for example where it would cause the supplier hardship.

There are also provisions to force dissenting creditors to be bound by the plan provided the Court finds it to be fair and equitable and that the creditor would be no worse off if the company entered an alternative insolvency procedure.

The new regulations also temporarily remove the threat of personal liability for wrongful trading from directors in the period between 1 March to 30 June and prohibit creditors from filing statutory demands and winding up petitions for coronavirus related debts.

Certain financial services firms have been excluded from parts of these reforms as their regulators already have powers to intervene and there are special insolvency regimes available to them.

Governance Changes - NEW

The legislation will also ease the administration burden by allowing companies to hold closed AGMs, conduct business and communicate with members electronically, and extends filing deadlines, during the period of the pandemic.

These provisions will also be retrospective meaning that companies which have held AGMs but didn’t meet the requirements of their constitution will have done so in accordance with the law.

Friday, 22nd May, 2020