COVID-19 Legal Update: Corporate Governance

Directors must continue to consider the interests of employees and stakeholders during this period. Businesses should look at practical solutions to the problems raised by Covid-19.

Practical guidance

Many insurance policies are unlikely to cover the impact of Covid-19 but it is worth checking. Companies planning their AGMs should be considering contingency plans and checking their company articles for options. Alternatives to a physical AGM could be delaying convening the AGM, considering whether the AGM could be held virtually or adjourned.

Filings/Stamp duty

Companies House have announced that companies can apply for a three-month extension for filing their annual accounts. Stamp duty documents and payments should only be sent electronically for now.

Financial assistance

The Business Interruption Loan Scheme will provide loans of up to £5m with no interest due for 12 months. These loans will be delivered through the British Business Bank. Business will be eligible for this if they are UK based, with turnover of no more than £45m per year and subject to certain other British Business Bank requirements. Businesses can also choose to defer VAT payments for the next quarter up to the end of June 2020 with businesses given until the end of the current financial year to make the deferred payments.

Wrongful trading/insolvency legislation

On 28 March, the government announced that it will suspend the law in relation to wrongful trading. This means directors can continue to pay staff and suppliers even if there are fears the company could become insolvent. Also, they will introduce a temporary moratorium on businesses undergoing a restructuring process, during which time the business cannot be put into administration by creditors and will continue to be able to access all raw materials. These new measures will apply retrospectively from the beginning of March and will be introduced at the earliest opportunity. However, in the meantime, it is important to note that directors and companies remain subject to their other existing duties and obligations and should seek advice if necessary.

Please contact David Judah for further information.

The information in this article was prepared on 3 April 2020. The law and practice is currently changing daily, so please check the up to date position before acting on anything you read here.