CIGA – relevant periods summary – updated 1 July 2021

For ease, the temporary measures, and the dates when those measures expire (or expired) are summarised below:

Under CIGA, the temporary measures can be extended to 22 April 2022.  This page will be updated with any further extensions.

Brief explanation of temporary measures

1. Restriction on the presentation of winding up petitions and relying on statutory demands (Section 10 & Schedule 11 of CIGA)

• A creditor cannot rely on a statutory demand presented during the relevant period as grounds for a presenting petition.
• A creditor may not present a petition to wind up a company unless the creditor has reasonably grounds for believing that:

1: Coronavirus has not had a financial effect on the company, or

2: The facts by reference to which the relevant ground applies would have arisen even if coronavirus has not had a financial impact on the company.

Note: these measures do not apply to individual debtors.

2. Suspension of liability for wrongful trading (Section 12 of CIGA)

• This applies to sections 214 or 246ZB of the Insolvency Act 1986 and has the effect of temporarily removing the threat of personal liability arising from wrongful trading for directors who cause a company to trade a company through the crisis with the uncertainty that the company may not be able to avoid insolvency in the future.
• The provision ended on 30 September 2020 and was reintroduced from 26 November 2020, without retrospective effective.
• Whilst the provisions concerning liability for wrongful trading were suspended, the duties owed by a director are not affected.

3. Protection of supplies of goods and services / Temporary exclusion for small suppliers (Sections 14 & 15 of CIGA)

• Essentially this provision stops a supplier from relying on an ipso facto clause to terminate a contract following the insolvency of the other party.  However, there is a temporary exclusion for small suppliers, such that they can continue to rely on Ipso facto clauses.
• Where the supplier is not in its first financial year at the relevant time, it is a small entity at the relevant time if at least two of the following conditions applied in its most recent financial year:

1: the supplier’s turnover was not more than £10.2 million

2: the supplier’s balance sheet total was not more than £5.1 million

3: the number of the supplier’s employees was not more than 50

• Larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process.

4. The temporary rules supporting Part A1 moratorium

• Whilst the free-standing moratoria of UK companies to pursue a rescue of restructuring plan in a permanent measure, temporary modifications relax the entry requirements, and a company may enter a moratorium even it is has been subject to an insolvency procedure in the previous 12 months.
• Any company considering using the moratorium procedure should seek advice.

5. AGMs and Company meetings (Section 37 of CIGA)

• CIGA introduce greater flexibility as to how AGMS are held.  Meetings could be held virtually, regardless of the company’s constitution, thereby enabling them to take place without breaching COVID-19 restrictions.
• This flexibility has come to an end.  Given that there are still restrictions in place, holding an AGM that complies with the Companies Act 2006 and a company’s constitution could be difficult.  The Chartered Governance Institute has published guidance and companies may want to seek legal advice.

Whilst not dealt with here, the furlough scheme has been extended and modified, and there have also been extensions to the restrictions on the forfeiture of business tenancies and the restriction on commercial rent arrears recovery (CRAR) (extensions to 25 March 2022).  There is also a proposal to introduce legislation to address accrued rent arrears of businesses that were forced to shut.

Some of our previous articles on this topic:

• CIGA – much ado about nothing?
• Collecting debts in a pandemic 
• Suspension of wrongful trading 
• CIGA – extension of time