Comment: A legal lifeline has been extended

The Corporate Insolvency and Governance Act (or CIGA, for short) was initially passed into law on June 25, 2020. It has indeed been a welcome relief for many businesses who find themselves struggling to pay their financial dues and continue trading in the midst of Covid.

Like many schemes introduced in response to the pandemic, some terms of CIGA were supposed to be temporary and only scheduled to apply for a number of months.

However, as the UK continues to struggle as result of the crisis, and we find ourselves entering ‘Lockdown 3’, the terms of CIGA have been extended once again meaning businesses will continue to benefit from the reassurance that certain debt recovery and enforcement methods will remain on hold for a little bit longer.

When initially introduced into law in June last year, the terms of CIGA meant that statutory demands effectively became redundant with immediate effect, and any such demands issued between March 1, 2020, and September 30, 2020, were unenforceable.

This expiry date of September 30 was subsequently extended until December 31, 2020, and on December 9 was once again extended further – meaning restrictions on statutory demands will remain in place until March 31, 2021.

Likewise, under the original wording of the Act, the restrictions on winding-up petitions (and on the courts making winding-up orders) were to remain in place only until September 30, 2020. This date too has been extended until March 31, 2021.

The confirmation of a further extension is undoubtedly welcome news for the many travel businesses that live in fear of their creditors taking extreme steps to recover any sums due. This most recent development will grant some relief (at least until March) when we hope against hope that travel will have opened up again and sales will reconvene.

Statutory demands were rife at the being of March, and we saw travel companies being inundated with demands from both consumers demanding refunds and suppliers demanding payment of bills.

Those numbers dropped off a cliff when the Corporate Insolvency and Governance Act came into force and the act has therefore been a lifeline for many struggling to cope during the current crisis.

In a further update from the government, it was announced on December 9 that business owners affected by the pandemic will be protected from eviction until the end of March 2021.

This is further good news for those businesses worst affected by the pandemic, including many travel agent shops. The extension has been put in place to help those affected rebuild over the winter period and will allow a further three months for tenants to come to an agreement with their landlord about any unpaid rent.

The government has made clear, however, that where businesses can pay any or all of their rent as normal, they should do so.