Changes to statutory compliance duties
As the nation faces one of the most challenging times in decades, the government have made changes to the statutory compliance duties of businesses to ease the burden. We have summarised these updates below.
Insolvency measures extended
The government has extended insolvency measures to support businesses during the pandemic and help them recover.
The measures, which were introduced in March 2020, include protecting businesses from aggressive creditor enforcement and removing personal liability on company directors. After previous extensions last year, the measures have been extended again until the end of June 2021.
The measures being extended include:
- Statutory demands and winding-up petitions will continue to be restricted to protect companies from creditor enforcement action due to debts related to COVID-19.
- Small suppliers will not have to continue to supply a business in insolvency. However, larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process.
- Entry into a moratorium will remain relaxed and a company will be able to enter a moratorium if they have been subject to an insolvency procedure in the previous 12 months. These measures will be extended until 30 September 2021.
You can read more about these measures here.
Previous update: July 2020
Companies House changes
Authorisation codes sent to home addresses
Companies House users can now request to have authorisation codes sent to home addresses instead of the company’s registered office.
This is a temporary measure due to the COVID-19 outbreak.
Restart of the voluntary strike off process
From 10 September 2020, Companies House will restart the process for companies that have applied for voluntary strike off.
Further details can be found here.
Temporary changes to filing requirements
The Companies etc. (Filing Requirements) (Temporary Modifications) Regulations 2020 (“the regulations”) were signed into law on 26 June 2020 and came into force on 27 June 2020.
The measures introduced by the regulations will relieve the burden on businesses during the coronavirus outbreak and allow them to focus all their efforts on continuing to operate.
Full details of the changes can be found on the government website here.
Given the current crisis, Directors are being urged to look again at their dividend policy and consider the following:
- Is the policy still fit for purpose?
- For any proposed dividend, how has the solvency of the company been assessed, including any potential impact of COVID-19?
- Section 172 of the Companies Act contains the duty to “promote the success of the company for the benefit of its members as a whole.” How does the dividend policy align with this requirement?
- How can directors protect themselves from any suggestion that decisions to pay dividends were not influenced by the need of the director/shareholder for income, as opposed to the needs of the company, especially where the facts point to such a conclusion?
- Should directors consider paying owner/directors on PAYE, rather than through dividends?
As at 1 June, there remains no indication from the government that support will be available to shareholders where the amount of their dividend has been impacted by the COVID-19 pandemic.
Annual General Meetings (AGMs)
New legislation has been introduced to provide companies, who are required by law to hold AGMs, greater flexibility to enable them to do so safely, including holding AGMs online or postponing the meetings.
Corporate governance and insolvency Bill
The government has introduced the corporate governance and insolvency Bill in parliament. This will put in place a series of measures to amend insolvency and company law to support business to address the challenges resulting from the impact of COVID-19.
The Bill consists of six insolvency measures and two corporate governance measures. The measures include:
- introducing a new moratorium to give companies breathing space from their creditors while they seek a rescue;
- prohibiting termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process;
- introducing a new restructuring plan that will bind creditors to it;
- enabling flexibility to the insolvency regime to meet the demands of the emergency;
- temporarily removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency;
- temporarily prohibiting creditors from filing statutory demands and winding up petitions for coronavirus related debts;
- temporarily easing burdens on businesses by enabling them to hold closed Annual General Meetings (AGMs), conduct business and communicate with members electronically, and by extending filing deadlines; and
- allowing for the temporary measures to be retrospective so as to be as effective as possible.
Details of how to apply for a moratorium were published by the government on 26 June and can be found here.
Gender Pay Gap reporting
Enforcement of gender pay gap reporting deadlines have been suspended for this year.