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Coronavirus (COVID-19)

Contents

Business start-up and coronavirus

In this section you'll find information and updates related to coronavirus that are relevant to the law on starting and running a business.

The UK's response to coronavirus is changing regularly and often very quickly. While we'll continue to make every effort to keep this page up to date, there may be short periods where what you read here is not the latest information available. Where possible we've tried to provide links to official sources, so you can check the current situation.

AGMs and filing requirements

Ordinarily, companies have statutory obligations to hold meetings and to file documentation on the Companies Register. The pandemic has made it difficult to meet these requirements, and on 28 March 2020 the UK government announced that it would bring forward legislation to introduce temporary measures to help. On 25 June, the Corporate Insolvency and Governance Act 2020 was passed to do this. The temporary measures apply retrospectively from 26 March.

These temporary measures include relaxations on filing requirements and more flexibility around when and how AGMs are held.

Also, regulations made under the Act extend any filing deadlines falling between 27 June 2020 and 5 April 2021 (including these dates) for:

  • confirmation statements
  • accounts
  • registrations of charges (mortgage); and
  • event-driven filings, such as a change to your company's directors or people with significant control.

The Act covers rules for holding certain company meetings between 26 March and 30 December 2020 (the relevant period) in ways that help stop the spread of COVID-19. This includes general meetings, meetings of a class of members, and meetings of delegates appointed by members.

Any such meetings held during the relevant period:

  • Need not be held at any particular place
  • May be held by electronic or any other means (including the casting of votes)
  • May be held without any number of those participating in the meeting being together at the same place.

Members of the company will not have the right to:

  • Attend the meeting in person
  • Participate in the meeting other than by voting
  • Vote by particular means.

However, members will continue to have a right to vote by some means.

These measures override any contrary requirements in a company's articles of association.

They apply retrospectively from 26 March. That means any company that has held a relevant meeting since then in a way that adhered to COVID-19 social-distancing measures, but not the relevant obligations in their articles, will have complied with the law.

The relevant period can be shortened or extended by up to 3 months at a time, but can't be extended beyond 5 April 2021.

The Department for Business, Energy & Industrial Strategy has prepared a Q&A document to help companies.

Directors' duties and wrongful trading

On 28 March 2020, the UK government announced that it would temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 for 3 months. On 14 May, the Government announced that this suspension will continue until 30 June. On 25 June, the Corporate Insolvency and Governance Act 2020 was passed, which further extends the suspension period.

The wrongful trading provisions state that if, at some time before the start of a liquidation or administration, a director knew or ought to have known that there was no reasonable prospect of avoiding either outcome, and they failed to take every step to minimise the potential loss to creditors, then a court can require the director to contribute to the company's assets. In other words, a director can incur personal liability for wrongful trading.

The Corporate Insolvency and Governance Act 2020 provides that, in assessing what contribution (if any) a director is to make to a company's assets when considering possible liability for wrongful trading, the court is to assume that the person is not responsible for any worsening of the financial position of the company or its creditors during the 'relevant period'.

The relevant period is the period beginning on 1 March and ending on 30 September.

The Act does not require the worsening position to be caused by the COVID-19 crisis. The provisions are not available to directors of financial services firms, including insurance companies and banks.

The suspension of the wrongful trading provisions does not, however, provide complete protection to directors. Other claims can still be made that could make directors personally liable. E.g.:

  • Fraudulent trading;
  • Misfeasance;
  • Breaching duties set out in the Companies Act 2006 (including a duty to consider the interests of the company's creditors at the point when the director knows or should know that the company is or is likely to become insolvent); or
  • Where a company enters into transactions that can be clawed-back by an administrator or liquidator.

Directors of companies that are experiencing financial uncertainty and distress and that may become insolvent, need to consider and act in the best interests of their creditors, and document their decisions and thought processes to be able to demonstrate that they have considered these interests in their decision-making.

A director's general duties under the Companies Act 2006 remain unaffected. These are to:

  • act within powers;
  • promote the success of the company;
  • exercise independent judgment;
  • exercise reasonable care, skill and diligence;
  • avoid conflicts of interest;
  • not accept benefits from third parties; and
  • declare an interest in a proposed transaction or arrangement.

New insolvency provisions

The Corporate Insolvency and Governance Act 2020 makes several changes to help companies who are in serious financial difficulty due to coronavirus. For more on this, see our Coronavirus (COVID-19) Debts and debt recovery section.

Tax and other financial help

See our Coronavirus (COVID-19) Debts and debt recovery section for information on the temporary tax and other financial help available to businesses and the self-employed.

What is the law guide

The Desktop Lawyer law guide aims to present the law to you in a comprehensive yet jargon-free and easy-to-read format. Our law guide is constantly kept up to date with changes in business and family law by our team of in house solicitors, and includes information across all the legal jurisdictions in the UK.

Our law guide is free to use. Where we provide documents related to this area of law, or where they may help you with any legal issue in this area, they will be listed to the right of this message.