Delaying the inevitable? Businesses struggling to stay afloat thrown a further lifeline by the Government


Temporary measures to protect businesses from the economic fallout of Covid-19 will be extended, the government has announced:

  • companies will be able to hold AGMs remotely until the 30 December 2020 (regardless of their articles of association);
  • statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from creditor enforcement action as a result of coronavirus related debts;
  • termination clauses in contracts will also still be prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process (Note that small suppliers will remain exempted from the obligation to supply until 30 March 2021);
  • modifications to the new moratorium procedure, which relax the entry requirements to it, will be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. 
  • the temporary moratorium rules will also be extended to 30 March 2021

These short-term measures, introduced by the Corporate Insolvency and Governance Act 2020, were due to expire on 31 September 2020.

Although surely well-intentioned, will the extension of these measures do more harm than good? For every protected debtor, creditors suffer. Would a dose of corporate Darwinism strengthen the economy in the long term? 

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