Insolvency Measures during Covid
The insolvency measures to help prevent businesses unable to meet debts due to the impact of Coronavirus to continue trading and not be forced to file for bankruptcy have been extended. It was confirmed that the temporary suspension of wrongful trading liability during the pandemic will now continue until 30 June. The measure was initially set to expire on 1 June 2020.
This means that company directors can keep their businesses going without the threat of personal liability. This measure allows directors of companies to pay staff and suppliers even if there are fears the company could become insolvent due to the Coronavirus outbreak.
The Department for Business, Energy and Industrial Strategy (BEIS) also confirmed that temporary measures to give companies and other bodies flexibility regarding Annual General Meetings (AGMs) and other meetings will be made retrospective to 26 March 2020.
The BEIS and the Financial Reporting Council (FRC) have also jointly published a Q&A document containing further clarifications. The document confirms that the government intends to introduce the necessary legislation as soon as the Parliamentary timetable allows and that the measures will apply retrospectively from 26 March.
However, it is important to note a caveat within the document stating that ‘while it is our expectation that the legislation passes into law and applies retrospectively, we cannot guarantee this outcome. Therefore, companies and other bodies will need to take their own view on how to proceed.’
Under the proposed legislation, companies will have until the end of September 2020 to hold their AGMs. This date will be extended if necessary. The measures will also apply to general meetings or other meetings of members that are required.