For litigators the most important provision is the extension of the restrictions on the use of statutory demands and winding up petitions until 31 December 2020. The Act, of course, provides that no winding up petition can be presented on the basis of a statutory demand during the relevant restricted period and that where a winding up petition is presented (by a creditor on any basis) a court must be satisfied that coronavirus has not had a "financial effect" on the company before the presentation of the petition. This is an important restriction and a difficult one for creditors to navigate around. Even where petitions can be presented on a basis other than a statutory demand, such as a charge for payment, the scrutiny by the court as to the financial effect of coronavirus is likely to put paid to any petition. That said, there are examples in England & Wales of winding up petitions having been granted where the grounds of petition arose prior to coronavirus and would have inevitably arisen regardless of it.
The other extensions are the extension of the relaxation of the company AGM requirements until 30 December 2020, the small supplier exemption from termination clause provisions and the modifications to the moratorium provisions and temporary moratorium rules until 30 March 2021.
One notable absence from the provisions of the 2020 regulations is any extension to the wrongful trading suspension. That will, therefore, expire on 30 September 2020. Our understanding is that the absence is deliberate and the extension will not be renewed largely because it is of very little effect. If the liability of a director arises when that director fails to take reasonable steps with a view to minimising the loss to creditors, it is difficult to see how it applies in relation to coronavirus. To put it another way, what steps could a director take when faced with debts that arise as a consequence of coronavirus?
That being said, as we have said before, directors should be extremely careful to document any decisions taken at the moment and should not take a more relaxed approach to their duties than they would have done before the advent of coronavirus. Their fiduciary and other duties under the Companies Acts all still apply and, in addition to the wrongful trading provisions of the Insolvency Act 1986, the fraudulent trading and misfeasance provisions remain relevant. Being a director of a business has never been more difficult and taking advice remains key where difficult decisions need to be made.