Summary of recent corporate updates that are relevant to directors of SME's and their advisors

1. SUMMARY OF RECENT UPDATES
RELEVANT TO DIRECTORS AND THEIR
ADVISORS

2. CORPORATEINSOLVENCY&
GOVERNANCEACT2020(Ext)
WHAT IS IT?
• A change introduced specifically during ‘Covid’ to relieve pressure
on businesses from creditors
• Aimed at preventing aggressive enforcement action by including a
restriction on the use of statutory demands and winding up
petitions up to 30 September 2020
• This has now been extended to 31 December 2020
• It also included a temporary suspension of wrongful trading rules
for directors from 1 March 2020 to 30 September 2020
• So far this suspension NOT been extended and ceased on 30
September 2020

3. CORPORATEINSOLVENCY&
GOVERNANCEACT2020(Ext)
WHO IS
AFFECTED?
COMPANIES OWED MONEY
• Will not be able to use a statutory demand/winding up petition as
a debt collection tool until at least after 31 December 2020
• UNLESS they are able to show that Covid has not had a
financial effect on the debtor and/or the debtor would not
have been able to pay the debt regardless of Covid
• Must now consider alternative debt collection remedies (and their
associated costs) and reflect the possibly worsened book debt
position in their own cashflows/planning

4. CORPORATEINSOLVENCY&
GOVERNANCEACT2020(Ext)
WHO IS AFFECTED CONT…?
COMPANIES OWING MONEY
• Will not be exposed to the effect of a statutory demand/ winding
up petition being served until at least after 31 December 2020
• UNLESS the creditor is able to show the debt/ position is
NOT as a result of Covid in a winding up petition
• Will benefit from no formal recovery action for now (and
improved cashflow) but must consider the delayed impact of
aggressive action once restrictions are lifted (possibly by more
than one creditor simultaneously)
• Despite the immediate protection, they should look to
maintain dialogue and relationships to avoid sudden,
irreversible action in 2021

5. CORPORATEINSOLVENCY&
GOVERNANCEACT2020(Ext)
WHO IS AFFECTED CONT…?
DIRECTORS OF COMPANIES IN FINANCIAL DISTRESS
• Were not at risk of a wrongful trading action for period 1 March
2020 to 30 September 2020
• BUT this had no bearing on overall primary director duties
and they could still be at risk of other actions such as
misfeasance, antecedent transactions, fraudulent trading etc
• Actions from 30 September 2020, that could be attacked under
wrongful trading provisions, could leave the director with
PERSONAL LIABILITY

6. CORONAVIRUSACT2020
WHAT IS IT?
• Prior to Covid, commercial landlords were usually able to
forfeit a lease for non payment of rent.
• The Coronavirus Act 2020 temporarily took away a landlord’s
ability to forfeit for non payment of rent. This moratorium has
currently been extended until 31 December 2020.
• The Act provides that until 31 December 2020 a landlord will not
lose the right to forfeit unless he agrees to do so. This means that
once the stay is lifted a landlord may be able to forfeit in respect
of a failure to pay rent due on the March 21 Quarter Day.

7. CORONAVIRUSACT2020
(&CommercialRentArrears
Recovery)
WHAT IS IT?
• Prior to Covid, commercial landlords were able to use the
Commercial Rent Arrears Recovery (‘CRAR’) procedure to take
enforcement action regarding non-payment of rent.
• To protect struggling businesses that could not meet rent
payments due to the impact of Covid, The Coronavirus Act 2020
extended the number of overdue days’ rent that needed to have
accrued before CRAR could be used.
• From 29 Sept 2020 CRAR can only be used if 276 days rent is
overdue and after 25 Dec 2020 this will increase to 366 days rent
being overdue.

8. CORONAVIRUSACT2020
(&CommercialRentArrears
Recovery)
WHO IS
AFFECTED?
LANDLORDS
• Currently a Landlord’s ability to use CRAR is severely restricted and they
are unable to forfeit a lease for non payment of rent until after Dec 20
• Whilst tenants must pay where they are able to, the Code of Practice is
only voluntary and therefore landlords practically need to consider
alternative recovery remedies until 2021 (e.g CCJ/ pursuing non rent sums)
• Extremely hard for landlords, especially when there has been wide
concern about abuse of the restriction and rent being unpaid even where
there are funds to do so
• Whilst forfeiture rights are specifically protected in this period, they
must be sure not to compromise any further enforcement rights they
may have at a later stage by taking ill advised actions or pursuing
other remedies at this stage. Comprehensive advice is crucial here.

9. CORONAVIRUSACT2020
(&CommercialRentArrears
Recovery)
WHO IS
AFFECTED?
TENANTS
• Currently tenants could make minor payments to bring their rent arrears
down to less than the equivalent of 276 days or 366 days after Dec 20 to
prevent landlords using CRAR
• Tenants should carefully check the validity of any attempts by landlords
to take enforcement action during this period of tenant protection and
be aware of invalid ‘bluffs’
• Whilst there are also restrictions on other enforcement action such as
forfeiture and winding up petitions, tenants need to be alive to the
possibility of any alternative actions as well as landlords asserting
practical leverage and any adverse impact on a future relationship for
continued trading where their assistance may be needed
• Tenants to also look out for any action by the landlord that may
compromise future claims

10. WINTERECONOMYPLAN
WHAT IS IT?
• The Autumn 2020 Budget was replaced with the Winter
Economy Plan
• Prior to Covid there was wide speculation that reforms to
Capital Gains Tax and Entrepreneurs Relief were imminent in
the Budget
• The huge government spend in the last few months will only
add fuel to this as taxes will be raised to make up the deficit

11. WINTERECONOMYPLAN
WHO IS
AFFECTED?
OWNERS OF SOLVENT BUSINESSES LOOKING TO EXIT
• This extends the period for directors considering a tax efficient exit
from their business to take advantage of CGT/ ER before any
reforms take affect
• This could include a business sale or a solvent Liquidation
• The earlier directors can start considering the options available to
them, the more chance they will have to take full advantage of
any tax benefits
• We have seen this become particularly relevant for businesses that
have successfully accumulated reserves over the years but now do
not wish to risk them diminishing by continuing to trade in uncertain
times.

12. OTHERUPDATES
EMPLOYEE COSTS
• Furlough replaces by Job Support Scheme on 1 November 2020
• This will add urgency to directors weighing up the ongoing cost of
retaining staff versus the impact of immediate redundancy costs for
business efficiency and possibly survival.
• Very complicated issues surrounding employment, furlough and
redundancy during these times. HR Huddle and KSB Law have some
good links to discuss some of these issues, including the process for
employees with less than two years service:
https://www.youtube.com/watch?v=GTWG51v18tg
• The Government will step in and pay employee claims (subject to limits)
in an insolvent situation but only after a formal process has been
commenced
• When calculating possible redundancy costs the government has a useful
calculator tool: https://www.gov.uk/calculate-your-redundancy-pay

13. OTHERUPDATES
INSOLVENCY
• Termination clauses cannot be enforced in an insolvent scenario
(CIGA 2020)
• ‘Light touch Administration’ New Moratorium allows struggling
Companies breathing space initially for 20 days (30 for small
companies). Some of the temporary provisions relaxing the criteria
due to Covid have been extended until March 2021
• CBILS/ BBL fraud is anticipated to be huge and will be
investigated not only in ongoing scenarios but will play a key part
in insolvent investigations. It will be crucial to seek early advice
in this regard.

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Call us on 01455 560042
Or email us at Sonia@assistbc.com
If you would like further information on any of the areas covered
WE ARE HERE TO HELP
Feel free to give us a call on 01455 560042
Or email us on Sonia@assistbc.com
for any further information
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