How has the law changed?
In part in response to the Covid-19 pandemic, legislation was passed by the government earlier this year which sought to assist companies to trade through the current economic climate. Included within the measures is a degree of protection from compulsory winding up.
The Corporate Insolvency and Governance Act 2020 (The Act), was laid before parliament on 20 May, and became law on 26 June. It is important creditors are aware of what changes have been implemented and the potential and impact which it may have upon debt recovery action you may be considering or have already commenced.
The main part of the Act affecting creditors is the temporary restriction on presentation of winding up petitions and the factors that the Court has to take into account when deciding whether to wind up a company.
On Thursday 24 September 2020 the government passed a further statutory instrument which extended the operation of these restrictions. As a result, the measures which were due to expire on Wednesday 30 September 2020 have now been extended until 31 December 2020.
A key point to note is that the Act has retrospective effect so any pending petitions presented after 27 April will be affected, along with any winding up orders made after that date.
The Act has introduced the following restrictions:
- A petition cannot be presented by a creditor during the period of 27 April 2020 and 31 December 2020 unless the creditor has reasonable grounds to believe that (a) coronavirus has not had a financial effect on the debtor, or (b) the debtor would have been unable to pay its debts even if coronavirus had not had a financial effect on the debtor;
- A petition cannot be presented after 27 April 2020 if it is based on a unsatisfied statutory demand served between 1 March 2020 until 31 December 2020;
- When deciding whether to make a winding up order the Court will need to be satisfied that the grounds giving rise to the petition would have arisen even if Covid-19 did not have a financial effect on the debtor;
- All winding up orders made between the 27 April and 31 December will automatically be void (that is, of no legal effect) unless the Court would have made the winding up order if the new law was in force at the time the order was made.
Related FAQs
It is clear that we are emerging from a completely unprecedented period of disruption for many businesses, and this may have had a huge impact on their contractual arrangements both with suppliers and customers.
As the lockdown eases, and we get back to business, it’s important that businesses take stock of what has happened, and ensure they review and address the legal and contractual consequences of what has been happening since the start of the global pandemic.
The CMA is particularly concerned about certain activities, its guidance highlights:
- Exchange of commercially sensitive information where this is not necessary in response to the crisis
- Collaboration which unfairly excludes third parties
- Abuse of a dominant position (including a dominant position held as a result of the crisis) – particularly to charge excessive prices
- Seeking to maintain prices or prevent reductions in prices
- Cooperation going beyond what is necessary to respond to the crisis in the interests of consumers
It is the individual assessment by an organisation of its Covid-19 risk in its workplace that will be central. There may be common features across sites or areas of a site but every workplace will have a different risk profile depending on the service it offers and the workers who deliver those services. No one size fits all.
The context of managing Covid-19 risk is the need to tie in with UK government guidance and HSE advice – which despite being a lot more comprehensive than it was, is not a panacea and will continue to evolve. The difficulty we have with this in the context of the known increased risk to BAME employees from Covid-19 is that our understanding of the risk is, we would suggest, at a pretty early stage which makes it more difficult to address. However we know the increased risk exists and we owe our BAME workers a duty to manage that risk and keep them safe.
We also have a duty to consult employees. This is critical in managing this risk – ensuring BAME workers have a loud voice in the assessment process will be very important.
Where an individual has a particular characteristic, for instance they’re pregnant, they have physical or mental disabilities etc, the law requires us to look at that individual or, where it is a group, that group of individuals and assess the risk to them and take any reasonably practicable steps to control the risk to them.
Risk control hierarchy is key. In “normal” businesses we reduce our Covid-19 risk by keeping people away from the workplace – “avoid, eliminate and substitute” then changing work practices (e.g. social distancing measures) before we arrive at PPE. In a healthcare context, we arrive at PPE a lot more quickly.
We need to ensure our people are given sufficient information, instruction and training so they can do their jobs safely and we must consult workers and involve them in workplace safety – this is going to be critical in the context of Covid-19.
All three of the PPNs are effective immediately and apply to the following Contracting Authorities:
- Central Government Departments
- Executive agencies
- Non-departmental public bodies
- Local authorities
- NHS bodies
- The wider public sector
In regards to PPN03/20, those in scope organisations that do not currently use procurement cards are advised to immediately put in place arrangements using the relevant Crown Commercial Service Agreement (Lot 2 of RM3828 Payment Solutions).
Employees on Flexible Furlough can engage in training during hours which you record your employee as being on furlough, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation.
Where training is undertaken by furloughed employees during hours which you record your employee as being on furlough, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time.