BREAKING NEWS: Government seek to extend moratorium on the issue of Statutory Demands and Winding Up Petitions, prohibition on Termination Clauses and modification to eligibility for the new Moratorium procedure



There has been much speculation, but little certainty, as to whether the government intended to extend the provisions of the Corporate Insolvency and Governance Act 2020 (the 2020 Act).

Today (24th September) the Government has laid before parliament regulations designed to extend the protection offered to struggling businesses by the 2020 Act, beyond the original 30 September deadline.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (‘Regulations’) will enter into force on 29 September 2020, provided they are not amended by parliament.

The Regulations run to a meagre two paragraphs and serve the sole purpose of extending the relevant period during which the restrictions and changes introduced by the 2020 Act apply.  On the assumption they enter force unamended, this means:

  • Statutory Demands and Winding Up Petitions will be subject to the restrictions of the 2020 Act until 31 December 2020;
  • Reliance on Termination clauses will be prohibited until 30 March 2021;
  • The relaxed entry requirements for the new moratorium procedure, which allows Companies that have entered an insolvency procedure in the past 12 months, will be extended until 30 March 2021.

Interestingly, and perhaps as a warning to company directors that are abusing the protection the 2020 Act has offered them; the Regulations do not propose to extend the suspension of liability for wrongful trading beyond the original 30 September 2020 date.

This will be welcome relief for struggling businesses and creditors, but clearly frustrating for creditors who have their own cash flow difficulties and encounter debtors who can afford to pay but simply refuse to by taking advantage of the protection of the 2020 Act.

For a better understanding of the provisions of the 2020 Act which have now been extended, Simon Newman and Christopher Pask wrote a series of updates earlier this year on its impact.  These can be found here:

If you or your clients are facing issues where the 2020 Act is at play and require any assistance with understanding how these provisions may impact upon your matter, members of 1 Chancery Lane are on hand to assist and should be contacted via the clerks by email or online form.

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