In the ever-evolving world of COVID-19, the government have announced a number of different changes for company directors that will assist with companies surviving the post COVID-19 trading era. The proposals are not intended to be long-term but to assist with the companies understanding they may be in breach of their legal duties, but are doing so in the best interests of the company.
The proposals are intended to keep affected companies afloat by:
‣ Encouraging directors to keep trading through creating a “safe harbour” from insolvency breaches if directors consider, in good faith, that any debts could probably still be paid within 18 months.
‣ Initiating a flexible “Business Debt Hibernation” regime by which creditors other than licensed insurers, registered banks and non-bank deposit holders can agree to freeze debts for six months while companies continue to trade on terms.
‣ Removing or reducing clawback claims to voidable transactions between arms-length parties.
‣ Relaxing statutory deadlines for filing and holding AGM’s, as well as relieving entities from their obligations to comply with their constitutions if affected by COVID-19. This could include:
‣ — permitting e-meetings where otherwise disallowed, and
‣ — permitting the use of electronic signatures where otherwise impractical.
The proposals are not intended as a general “workaround” for duties to act honestly and in good faith. You need to evaluate your business model and if it meets the above criteria then this should be noted by resolution and recorded as a formal minute in case there is any cashflow and solvency issues in the future. Please contact one of our partners to discuss your circumstances if you feel these new proposals apply to you.