Amendments to the Companies Act 1993 and legislation affecting other entities have been proposed to help entities affected by COVID-19 to stay afloat. The proposed changes include the following:
- Directors, trustees and partners who continue trading will have a “safe harbour” from potential insolvency breaches if they consider, while acting in good faith, that the company or the entity will be likely to be able to repay its debts within 18 months.
• A ‘Business Debt Hibernation’ regime has been proposed whereby if at least 50% of creditors agree, then debts can be frozen for seven months (1 month for creditors to consider the debtor’s proposal + 6 months if creditors approve) while allowing companies and entities to continue to trade on terms. This does not apply to creditors who are registered banks, licensed insurers and non-bank deposit holders.
• Clawback claims to voidable transactions between arms-length parties will be removed or reduced. This would provide peace of mind against liquidators seeking to unwind transactions in the event that the company is later placed into liquidation.
• The deadlines for AGMs and other constitutional requirements will be relaxed and extended where necessary. Measures such as e-meetings and electronic signatures will be permitted where they were previously disallowed.
The above points do not amount to legal advice and readers are strongly encouraged to seek legal advice should any of these matters be contemplated, or be of concern to you.