New Covid-19 protection for business under the Corporate Insolvency and Governance Act
New rules to protect struggling companies during the coronavirus crisis have officially become law under the new Corporate Insolvency and Governance Act, which received royal assent on June 25.
The new Act, which was fast-tracked through Parliament, is welcome news for many businesses hit hard by unprecedented commercial difficulties caused by the pandemic.
One of the key aims of the CIG Act, under its schedule 10, is to provide protection to companies by restricting creditors from bringing winding-up petitions when the debtor, as in this particular case outlined below, is clearly having financial problems specifically caused by Covid-19.
With legal disputes in this area expected to rise, Wards Solicitors' experienced and award-winning team of Disputes Solicitors can provide early advice to help you achieve the best possible outcome.
What happened in this case?
On 2 June, a High Court judge refused to allow a creditor to present a winding-up petition against an unnamed high street retailer on the basis of the then CIG Bill, rather than existing legislation.
The company had traded from a retail unit until it was forced to stop in line with the government's lockdown restrictions introduced to limit the spread of coronavirus.
It then failed to pay rent and service charges to the creditor under the lease.
The High Court's view was that Covid-19 had negatively affected the company's finances before the winding up petition was presented and that in normal times, it would have been able to pay its rent without a problem.
Mr Justice Morgan said he had a 'high degree of confidence that schedule 10 of the Bill would be enacted in more or less its current form and (by the end of June)."
On this basis, and after concluding that the winding-up petition would cause serious damage to the high street retailer, he granted an interim injunction.
"The grant of an injunction to restrain the presentation of the petition is powerfully supported by the clear policy objectives of the (Bill)," he said.
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