Corporate Insolvency and Governance Act 2020 (CIGA 2020) published swiftly on 20th May 2020 in response to Covid-19 with a view to assisting companies and director through the pandemic and associated disruption. It has received Royal Assent on 25th June 2020 and is the most significant changes in corporate insolvency in nearly 20 years.
This act is only designed to respond to the Covid-19 emergency and considerations into what else can be implemented to support otherwise viable businesses is being considered.
New measures include but are not limited to:
- A new moratorium to give companies breathing space from their creditors while they seek a rescue;
- A corporate restructuring plan to enable a company to eliminate, reduce, prevent or mitigate the effect of financial difficulties that could affect its ability to carry on business as a going concern;
- An extension of protection of supplies legislation, previously limited to ‘essential’ suppliers, designed to prevent ransom payments or punitive credit terms which would impact a company’s ability to trade;
- Breathing space for directors, with a blanket requirement on courts to assume directors are not responsible for any worsening of the financial position of the company or its creditors during the relevant period; and
- No winding up petition can be presented on the basis of a statutory demand, unless the creditor has reasonable grounds for believing that coronavirus has not had a financial effect.
The act introduces a new moratorium to give companies breathing space from their creditors while they seek a rescue. A new restructuring plan sanctioned by the court binds creditors to the plan. Directors must still fulfil their filing obligations with Companies House.
Companies House Filing Extensions
26th June 2020 the Filing Requirements (Temporary Modifications) Regulations 2020 were signed into law and came into force on the 27th June 2020. Below is a summary of the temporary changes.
The below extensions granted are a temporary measure and the extension will not apply on or after 6th April 2021.
Changes for public companies with are filing deadline between 26th March 2020 to 29th September 2020 are as follows:
- PLCs – deadline extended from 6 to 9 months
- Private company – deadline extended from 9 to 12 months
- LLP – deadline extended from 9 to 12 months
- SEs – deadline extended from 6 to 9 months.
Public companies and SEs whose original filing deadline fell on or after 30th June 2020 before it was extended by the act and will receive no further extension under the regulations.
It is important to note that extensions granted by regulators will apply to your original filing deadline and not added to the filing extension already granted by Companies House.
If you are eligible your filing deadline will be updated automatically.
Filing Confirmation statement
Time to file confirmation statements has been increased. 14-day deadline has been increased to 42 days for companies, LLPs, Scottish limited partnerships, Scottish qualifying partnerships and SEs. This extension is automatic, and you do not need to make an application.
42-days are being provided to submit event-driven filings for certain company events. In particular, any changes you’re required to file to update your company’s record before you file your confirmation statement. Additional details can be found on the link at the end of this article.
For charges created on or after 6th June 2020, the period to deliver a particular charge will automatically be increased from 21 to 31 days. The 31-day period starts the day after the date the charge was created. This extension applies to companies, LLPs, SEs and EEIGs.
It is important to note if the court has already extended the period than the above extension will not apply.
This legislation has been drafted and implemented extremely quickly and therefore requires some areas of clarification.
*Disclaimer – this does not constitute legal advice and legal advice should be sought to clarify your position.