The Government has announced that it will be introducing temporary changes to the Companies Act to help companies facing insolvency due to COVID-19. 

These have not yet been approved by Parliament, but it is expected that the temporary changes will include:

  • Offering Directors of companies facing significant liquidity problems due to COVID-19 a ‘safe harbour’ from their insolvency duties under the Companies Act.  This will allow Directors to make decisions to keep trading and take on new obligations without being in breach of their duties. 

  • Enabling businesses affected by COVID-19 to place existing debts into hibernation until they are able to start trading normally again, provided their creditors agree.  This should ensure that companies can continue to trade and that Directors will retain control of their companies, rather than having to pass control over to an insolvency practitioner (such as a liquidator).

  • Allowing the use of electronic signatures where necessary due to COVID-19 restrictions.

  • Giving the Registrar of Companies the power to temporarily extend deadlines imposed on companies, incorporated societies, charitable trusts and other entities.

  • Giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19.

The Companies Office website has detailed information about the proposed changes.

It is extremely important that Directors of any company that is facing financial difficulty obtain professional legal and accounting advice as a matter of priority.

The pandemic is causing all sorts of changes, but of course it must not be assumed that Directors will be able to do what they feel like and escape responsibility simply by blaming any and every action, reasonable or not, on the pandemic.

Talk with your legal advisor if your company’s solvency is in doubt, for expert advice tailored to your company’s situation. They will be able to recommend the best course of action for the company to ensure that its Directors comply with their legal obligations in managing the company’s insolvency.  At Rainey Collins we have an experienced team who can give Directors expert advice suited to their company’s particular situation.