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Wed 20th May 2020 - Government introduces new legislation to give tenants and company directors further breathing space
Government introduces new legislation to give tenants and company directors further breathing space: The government has introduced new legislation to give businesses further breathing space – and stop tenants being evicted over unpaid rent. The Corporate Insolvency and Governance Bill has temporarily suspended wrongful trading provisions – at least until 30 June – allowing directors to continue trading without the threat of personal liability. Wrongful trading entered UK insolvency law in 1986, making it an offence for a company director to continue to trade if they know the business is unable to avoid going into liquidation. The Department for Business, Energy and Industrial Strategy, which put forward the legislation, said it would protect otherwise viable companies from collapse. The UK government will also bring in three permanent measures through the bill. It will enable a “company moratorium” whereby struggling companies will be given formal breathing space for 20 business days, extendable to 40 days, to pursue a rescue plan without creditors being able to take a legal action. It will also change termination clauses in supply contracts so that when a company enters an insolvency or restructuring procedure its suppliers cannot use contractual terms to stop supplying or put up prices. And it will enable companies in financial difficulty, or their creditors, to form a “restructuring plan”, which dissenting creditors would be forced to sign up to if it is sanctioned by a court as “fair and equitable”. In a letter seen by Propel, the government said it would temporarily prevent landlords using Commercial Rent Arrears Recovery (CRAR) to collect unpaid rent. This is being achieved by increasing the amount of rent that must be due before CRAR can be used from the equivalent of seven days’ rent to 90 days’. This has been time-limited to align with the existing moratorium on forfeiture of leases in place until 30 June. Furthermore, in order to prevent tenants from being pressured into paying rent arrears, the government will legislate so statutory demands served between 1 March and 30 June are made void, unless a winding up petition was already issued before 27 April. In order to provide tenants greater protection from the negative consequences of a winding-up petition, the government will also legislate to prevent creditors petitioning for a company to be wound up on the grounds it cannot pay its debts, unless the court permits and is satisfied the inability to pay debts is not as a result of covid-19. This may mean the petition and any winding-up order based on it will be overturned, in which case the court will have the power to order the creditor who presented the petition to pay to restore the company to the position that it was in beforehand. These changes will continue until at least the end of June. The bill will also ease regulatory requirements so companies can delay annual general meetings (AGM) until late September or hold “closed AGMs” online. They will also be allowed to communicate with members electronically and delay Companies House filings, such as changes of director or annual returns. UKHospitality chief executive Kate Nicholls said: “The bill should provide businesses with some very welcome respite from aggressive landlords and valuable breathing space to restructure their businesses. It is very encouraging to see the government listening to the concerns of tenants and landlords, and acting decisively on what is a complex issue. Measures in the bill will provide more breathing space to deliver rent solutions with lower rent liabilities through mandated agreements.”

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