Temporary measures under the Corporate Insolvency and Governance Act 2020 (CIGA) extended again

In light of the ongoing Covid-19 situation, and the strain that it is putting on businesses, the government has announced further extensions of the temporary measures designed to give businesses some breathing space.

Extension of temporary measures

The following temporary measures have all been extended such that they now expire on 30 June 2021:

  • the temporary suspension of the use of statutory demands and winding-up petitions (Schedule 10 CIGA). (This had been set to expire on 31 March 2021.)
  • the suspension of liability for wrongful trading (Section 12 CIGA). (This had been set to expire on 30 April 2021.)
  • the exclusion allowing small suppliers to terminate a contract for the supply of goods or services (section 15 CIGA). (This had been set to expire on 30 March 2021.)

The remaining relaxations for obtaining a Moratorium (Schedule 4 CIGA), which were due to expire on 30 March 2021, have been extended to 30 September 2021. 

Suspension of liability for wrongful trading 

On this issue your attention is turned to the previous briefing of my colleague Lino Di Lorenzo.

As noted by Lino in more detail in his briefing, notwithstanding this temporary suspension, our current advice to directors of companies in financial distress is that a director must continue to act in the best interests of all the company’s creditors and should have a reasonable belief that the company can avoid an insolvency process or take every available step to minimise loss to creditors otherwise they are at risk of personal liability. This is because the duty to act in the best interest of creditors is not altered by CIGA and, acting on a prudent basis, not having a reasonable belief that a company can avoid an insolvency process and continuing to trade is unlikely to be in the best interest of creditors as a whole.

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