UK Corporate Insolvency and Governance Act 2020: some temporary measures extended to 30 June 2021

On 26 June 2020 the UK Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act marked the most significant insolvency reforms in a generation – introducing new permanent restructuring tools (such as the restructuring plan and the moratorium). It also introduced two temporary measures (see our blog post here) specifically dealing with the impact of COVID-19 on companies:

1. a suspension of personal liability for wrongful trading initially until 30 September 2020 – but then extended (with a short gap) to 30 April 2021; and
2. a temporary prohibition on creditors filing winding-up petitions on the basis of statutory demands or where COVID-19 has had a financial effect on a company, also initially until 30 September 2020 but extended to 31 March 2021.

It has now been announced that both measures are being extended to 30 June 2021. 

The extension of these temporary provisions provides ongoing breathing space to companies whilst coronavirus-related restrictions remain in place, ensuring that an immediate cliff edge is avoided.

This follows the previous announcement extending the restrictions on forfeiture of commercial leases to 30 June 2021 (see our blog post). Following that announcement it had been anticipated that the measures on winding up petitions would also be pushed out, as both measures go hand-in-hand when it comes to protecting commercial tenants (who, absent the latest announcement, might have been confronted with a raft of statutory demands on 1 April). Although it should be noted that the restrictions on winding up petitions are not specific to commercial tenants but apply economy-wide.

The 30 June end date has presumably been chosen in light of the government’s roadmap out of COVID-19 restrictions, which currently envisages an end to all legal limits on social contact on 21 June 2021. It is perhaps noteworthy that, unlike on previous occasions, there has so far been no clear signalling that this is considered by the UK Government to be the final extension. However, if the Government's roadmap remains unchanged, this may well be the last time the temporary measures are extended. You can read here our thoughts on whether the temporary extensions are likely to turn the tide. (Spoiler alert: for most, the 'when' to restructure remains a 'not yet', but with some sense that the Government's actions are delaying rather than preventing a reckoning.)