On Saturday 28 March 2020 the Secretary of State for BEIS, Alok Sharma, delivered an update on COVID-19, focusing primarily on measures to assist businesses.
The main areas addressed were:
- Company AGMs
- Wrongful trading
The proposals made on these three areas are policy statements. How these measures apply in practice will be determined by the drafting of the legislation which is yet to be enacted.
The government has not provided a timeframe for when such legislation will be proposed, but Sharma has stated it will be done as soon as possible. The proposals cannot be relied upon by companies at this stage.
Previous measures introduced
The update, and corresponding press release, summarised the measures that had already been introduced by the government to help ease the pressure on businesses. These include: income support schemes (for the employed and self-employed); packages of grants and loans; business rate holidays and VAT deferrals. Sharma stressed that the government aims to make sure businesses are in a position to bounce back once the virus threat subsides.
Coronavirus Business Interruption Scheme
On 23 March 2020, the government announced the Coronavirus Business Interruption Scheme. The scheme is aimed at businesses with a turnover of less than £45 million and provides access to financial support from one of the 40 accredited lenders – including all the high street banks. The financial support includes accessing loans, overdraft facilities, invoice finance, asset finance, and other measures. More details of the scheme can be found here:
Extensions for filing company accounts
The government and Companies House have agreed to allow companies a 3 month extension to the deadline to file their accounts. Companies will be required to apply for this extension on the Companies House website (link below). Currently, a company can only apply for this extension if the deadline to file the accounts has not yet passed. The application requires the following information:
- the company number
- an email address
- information about the extension reasons
- any documents that support the application (optional
As of 30 March 2020, 10,000 companies had successfully applied to extend their accounts deadlines. The government is considering offering extensions to other Companies House filings.
The government announced that measures would be proposed to give flexibility for companies holding their AGM. Measures are needed as under the Companies Act 2006, a company cannot postpone an AGM once it has been called. Companies who have called an AGM and are unable to hold it are potentially breaching their obligations under the Companies Act 2006.
The government intends to introduce measures allowing for an AGM to be postponed and also to offer greater flexibility for a company to hold their AGM virtually or via telephone.
Mr Sharma announced that the government is to propose insolvency law measures to protect companies who are experiencing financial difficulties and/or undergoing restructuring. Sharma emphasised that the overriding objective is to keep companies trading and allow them to access supplies and raw material.
The measures to be proposed will include:
- A moratorium for companies, preventing creditors from enforcing their debts while the company seeks rescue or restructure
- Protection of the company’s supplies to allow it to keep trading, during the moratorium
- A new insolvency plan that is binding on creditors
The proposals will also aim to balance the rights of creditors to ensure some payment whilst the debtor seeks a solution to their financial difficulty.
Wrongful trading provisions
The government will suspend the wrongful trading provisions under the Companies Act 2006, retrospectively from 1 March 2020 for three months. This will enable directors to explore methods of keeping companies trading, without the threat of personal liability. All of the other directors’ duties and checks and balances will remain in force.