On 24 September 2020 Chancellor Rishi Sunak announced that the government would be exercising powers reserved under CIGA to extend certain of its temporary provisions, amongst a raft of other government support for businesses affected by COVID-19, on the basis that existing measures to combat the pandemic will be required for much longer than first anticipated in March.
Amendments to certain of CIGA’s temporary provisions coming into force on 29 September 2020 under the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of Relevant Period) Regulations 2020 mean:
- The measures relating to statutory demands and winding up petitions (discussed in our previous article ) will now be in place until at least 31 December 2020
- The small supplier exemption to the protection of supplies provisions (discussed in our previous article ) will now be in place until 30 March 2021
- Until 30 March 2021, companies which have been in an insolvency process within the last 12 months will be able to access the new moratorium (discussed in our article)
- Companies which are required to hold AGMs have the flexibility to hold these meetings remotely until 30 December 2020.
What isn’t changing?
- CIGA temporarily suspended liability of directors for wrongful trading until 30 September 2020. That suspension has not been extended.
- Similarly CIGA temporarily disapplied until 30 September the requirement for a monitor in a moratorium process to assess that the company is likely to be capable of rescue. The requirement will reactivate as planned from 1 October.
What other measures for businesses did the Chancellor announce?
The Chancellor’s statement was heavily focused on assisting businesses with likely problems with cashflow. Support measures unrelated to CIGA announced include:
- A new Job Support Scheme to replace the Job Retention Scheme (as outlined by our Employment team’s article)
- Borrowers of bounce back loans will be able to take advantage of Pay As You Grow, enabling businesses to extend terms or move to interest only payments
- Business interruption loans will now be guaranteed by the government for 10 years
- Bounce back loans and business interruption loans will now be accessible until 31 December 2020, and a new loan scheme will be launched in January 2021
- Deferred VAT due to be paid in March 2021 can now be spread over 11 months without interest
- VAT rates on hospitality and tourism will remain at 5% until 31 March 2021.
These measures may assist businesses with some of the pinch points previously expected to cause business failure, although the Chancellor directly acknowledged that not every job or every business can be saved.