26/06/2020

Corporate Insolvency and Governance Act 2020

During the lockdown period, the government under section 82 of the Coronavirus Act 2020 introduced a temporary suspension of landlords’ rights to forfeit business leases for non-payment of rent until 30 June 2020. The government has announced that this date will be extended until 30 September 2020.

Now, further legislation has been passed in The Corporate Insolvency and Governance Act 2020 (CIGA 2020) which has received Royal Assent. Almost all its provisions commence today, Friday 26 June 2020, save that most of the temporary business protection measures it enacts have retrospective effect from 1 March 2020. These restrictions will prevent the use of statutory demands between 1 March 2020 and 30 September 2020, and winding up petitions presented from 27 April 2020 until 30 September 2020, where a company cannot pay its bills due to COVID-19 (unless the landlord believes on reasonable grounds that (a) COVID-19 has not had a financial effect on the company or (b) the facts that gave rise to grounds for the winding up petition would have arisen even if COVID-19 had not had a financial effect on the company).  These provisions will apply with retrospective effect.

The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (COVID-19) Regulations 2020) introduced temporary restrictions on landlords’ use of Commercial Rent Arrears Recovery between 26 March 2020 and 30 June 2020 unless rent was 90 days or more overdue. The government has also announced an extension of this end date to 30 September 2020, and landlords will be prevented from using CRAR before that date unless at least 189 days’ rent is outstanding.

These deadline extensions, alongside a new voluntary and temporary Code of Practice for commercial property relationships during the COVID-19 pandemic, are no real surprise, given the extent of financial difficulty currently experienced by tenants, particularly those in the retail, hospitality and leisure sectors.  As before, these interventions do not in any way write off rent for the March and June quarters, which remains due and owing.  Tenants will still need to find the means to satisfy these debts once the 30 September deadline has passed.  Tenants are encouraged to continue to pay rent, or as much of it as they can, in part to lessen the financial hardship to landlords but also to ease the impact of repaying arrears at the same time as making ongoing rental payments once normal lease relations resume.  Landlords and tenants have also been encouraged to collaborate and agree sensible concessionary terms and repayment plans where necessary to ensure the continued viability of businesses in extraordinarily difficult times.

In summary:

The following measures introduced as a COVID-19 response are now to be extended:

  • The temporary moratorium suspending landlords’ rights to forfeit business leases for non-payment of rent is to be extended to 30 September 2020.
  • The temporary changes relating to Commercial Rent Arrears Recovery (CRAR) will also be extended to 30 September 2020, and will prevent CRAR unless at least 189 days’ rent is outstanding.
  • The Corporate Insolvency and Governance Bill is also to be amended to extend the suspension of the use of statutory demands and winding up petitions as a means of rent recovery until 30 September 2020.

If you need advice on any of these matters, please contact richard.anderson@beswicks.com