In light of the ongoing COVID-19 situation, the Government last month announced further extensions of temporary measures under the Corporate Insolvency and Governance Act 2020 designed to give companies – including charitable companies and CIOs – some breathing space.
Amongst the provisions previously intended to end on 30 December 2020, but now extended until 30 March 2021, is the ability for charitable companies and CIOs to hold AGMS virtually, enabling members to examine papers and vote remotely (Schedule 14 CIGA).
Help for charitable companies and CIOs at risk of insolvency
The Government has taken a number of steps to help organisations at risk of insolvency, including by extending the remaining relaxations for obtaining a Moratorium under Part 1A and Schedule ZA1 IA1986 (Schedule 4 CIGA), and the temporary suspension of the use of statutory demands and a restriction on winding up petitions (Schedule 10 CIGA).
In addition, the Government has reinstated its suspension of liability for wrongful trading until 30 April 2021.
This is intended to provide some comfort to directors of companies (including trustees of charitable companies and CIOs) as to their potential exposure for wrongful trading under section 214 IA 1986, on the basis that when considering a director’s liability for wrongful trading, a court should assume that the director was not responsible for any worsening of the financial position of the company or its creditors during the relevant period.
Trustees should note, however, that there are now two relevant periods during which this provision applies, and they do not run one straight after the other, but from 1 March to 30 September 2020, and then from 26 November 2020 to 30 April 2021.
The Charity Commission’s coronavirus guidance has been updated to reflect these extensions of the temporary measures in relation to online meetings, and insolvency help.
Mergers and collaborations
Charities looking again at how they operate as a result of the pressures of the pandemic may also find a new section of the Commission's coronavirus guidance useful.
This section highlights both the Commission’s existing guidance on mergers and collaborations, and the availability of the recently revamped register of charities to allow charities to search for potential partners in any collaboration or merger.