Economy Minister Diane Dodds today welcomed the Corporate Insolvency and Governance Bill coming into effect in Northern Ireland.
The Bill makes permanent and temporary changes to Insolvency and Company law in Northern Ireland to help companies manage the financial and practical difficulties of Covid-19.
The Minister said:
“The pandemic has brought with it unprecedented challenges and unforeseen consequences for business.
“My officials have been working closely with their counterparts in Whitehall to bring these emergency measures forward that will help businesses through the current crisis.
“This new legislation will ensure Northern Ireland keeps in step with measures being put in place in the rest of the United Kingdom and is good news for the local business community.
“The new measures provide practical support for companies that may be facing insolvency as a result of the pandemic and will help give them the best chance of recovery.”
The Minister added:
“The economic recovery has begun and I am committed to doing all I can to create the conditions for local businesses who may have suffered to get back on their feet.”
The legislative changes will:
- Introduce new corporate restructuring tools to the insolvency and restructuring regime to give companies the breathing space and tools required to maximise their chance of survival.
- Temporarily suspend parts of insolvency law to support directors to continue trading through the emergency without the threat of personal liability for wrongful trading and to protect companies from creditor action.
- Amend Company Law and other legislation to provide companies and other bodies with temporary easements on company filing and annual general meetings.
Notes to editors:
1. Permanent Changes
The Bill gives struggling businesses a formal breathing space to pursue a rescue plan. It creates a moratorium during which no legal action can be taken against a company without the leave of the court. If the company is eligible an application for an initial 20 day moratorium can be made and extended in certain circumstances.
- Restructuring Plan
The restructuring measures will support companies with debt obligations to restructure under a new procedure. The court may sanction a plan that binds creditors to a restructuring plan if it is fair and equitable and in the interests of creditors. Creditors will be given the opportunity to vote on such a plan but the court has the power to impose it as long as certain conditions are met.
- Prohibition of Termination Clauses
When a company enters an insolvency or restructuring procedure suppliers of goods and services may stop supplying the company, as a condition of the contract. This can often jeopardise attempts to rescue the business. The Bill will mean that suppliers will not be able to use contractual terms to jeopardise a rescue in this way, with certain exemptions.
2. Temporary Changes
- Suspension of Wrongful Trading
The Bill temporarily removes the threat of personal liability arising from wrongful trading for directors who continue to trade a company through the crisis with the uncertainty that the company may not be able to avoid insolvency in the future. While the wrongful trading rules are suspended liquidators and administrators will be unable to make a claim against an insolvent company’s director(s) for any losses to the company or its creditors.
- Statutory Demands and Winding-up Notices
The Bill temporarily removes the threat of winding-up proceedings where the unpaid debt is due to Covid-19 by introducing temporary provision to void statutory demands issued against companies during the emergency.
- Annual General Meetings and other General Meetings
The Bill temporarily removes the requirement for meetings in person in order to fulfil companies' legal filing requirements. Companies and other bodies will be able to suspend shareholders’ and members’ ability to attend meetings in person by convening meetings using a range of technologies or alternatively postponing that meeting to a later date before the end of September and/or holding meetings with a restricted number of participants communicating between different locations.
- Companies House Filings
For a temporary period this will allow companies and other types of businesses registered at Companies House more time to file accounts, confirmation statements and details of relevant events, such as a change in director.
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