Corporate Update

Company and insolvency legislation and practice has changed in the past six months in a number of areas as a result of the Covid-19 pandemic and its effects. This is not least due to the introduction of the Coronavirus Act 2020 and the Corporate Insolvency and Governance Act 2020 (CIGA). Ben Madden, Partner and Head of Corporate and Commercial at CWJ summarises the key changes we’re set to see take place over the coming weeks.  

Voluntary Strike Offs

Companies House resumed the voluntary strike off process for companies with effect from 10 September 2020. The facility was suspended in April 2020 due to the pandemic. The process was halted for any companies that applied for voluntary striking off the register before July 2020, and these companies will be struck off in a phases after 10 September 2020. It is anticipated that the voluntary strike off process will continue as normal after an initial month for any companies that have applied to be struck off after July 2020.

Accounts and other Companies House Filings

Companies House filing deadlines for accounts were automatically extended by three months by CIGA, so private companies and LLPs with filing dates of 30 September for example will not need to file their accounts until 31 December 2020 in relation to the year ended 12 months previously. This extension is currently in force for deadlines falling before 5 April 2021.

Confirmation Statement and other event driven filings which are otherwise subject to a 14-day filing deadline currently have an extension to 42 days. Again, this extension is due to expire on 5 April 2021.

Registrations of mortgages, needing to be filed at Companies House within 21 days of their creation, are subject to an extension to 31 days.

Winding Up Petitions and Insolvency

CIGA has also implemented a prohibition on clauses in contracts which permit suppliers of goods in most cases to terminate or vary supply contracts when customers become subject to insolvency procedures. This does not mean that suppliers might not be able to terminate or vary those contracts for grounds other than an insolvency. A temporary exemption to this regulation for suppliers who are judged as ‘small’, first in place until 30 September 2020 and now extended to 30 March 2021. The effect of this prohibition is to increase risk to suppliers of goods of customer insolvency, and suppliers should be more mindful of monitoring their customers’ financial performance.

The restriction on winding up petitions and statutory demands was initially scheduled to come to an end on 30 September 2020, but as was inevitable in the current circumstances, the legislation made an extension of the restrictions possible, and an extension was implemented to 31 December 2020. This of course continues uncertainty for creditors who have been affected by Covid-19.

Gatherings and Meetings

The position in relation to company meetings, in particular where companies are obliged to hold annual general meetings, was initially relaxed until 30 September 2020, with the relaxation extended to 30 March 2021. This has been of particular assistance to listed companies who need to hold annual general meetings with potentially huge numbers of shareholders, in a situation where large gatherings are not possible.

Under the provisions of CIGA and following guidance from bodies such as the Chartered Governance Institute, general meetings have been able to be held online and to postpone their meetings during that relaxation period.

The announcements that restrict gatherings to no more than six people have been backed up with extension of permission for general meetings to be held virtually and behind closed doors up to 30 December 2020. This will help companies where meetings need to be held, but their governing documents make it impossible for meetings to be held in person and more than six people have to attend.

Lease Forfeiture

The Coronavirus Act 2020 imposed a moratorium on most commercial leases being forfeited for non-payment of rent and other sums payable under leases. This moratorium was extended to 31 December 2020 and so is subject to expiry or extension. Until that halt on enforcement expires, landlords would be left without the full range of recourse options, while rent continues to accrue. On the flip side, tenants are given breathing space as they continue to try to trade. Of course, this doesn’t mean that forfeiture and landlord enforcement is entirely impossible, as breaches of terms other than in relation to rent should still be enforceable.

Though not strictly in the scope of this article, but relevant to residential landlords, the position relating to residential tenancies was extended at the end of August, whereby in most cases landlords would need to give six months’ notice of intention to seek possession, the position being extended to 31 March 2021. More details on the new rules can be found here.

These aspects of course remain subject to change at any time, particularly in view of the constantly changing landscape on social distancing, indoor and outdoor congregation, travel and isolation rules, and the situation is due to persist for some time to come.

At CWJ, we remain committed to supporting our clients through these challenging times. If we can be of any assistance, please do get in touch on 01689 887887.