Relaxation in rules around charities and insolvency

by Hannah Danson | 1 Jul 2020 | Advice advocacy and legal, Sector news |

The Government passed the Corporate Insolvency and Governance Act on 26 June, giving new rules on insolvency, to address the financial problems caused by the coronavirus pandemic.

These rules apply to voluntary organisations as well as private companies, and the Charity Commission has issued guidance to charities to help them continue operating, and avoid insolvency. These provisions apply to charitable companies, and the majority of the provisions also apply to Charitable Incorporated Organisations (CIOs).

New Rules

The provisions cover:

  • moratoriums, offering companies and CIOs breathing space from debt enforcement action so they have the chance to explore options for rescue or restructure
  • limiting termination clauses in supply contracts, to provide for continuity of supplies so companies and CIOs can carry on operating
  • temporary suspension of wrongful trading provisions, allowing company directors and trustees of CIOs to continue operating a charity through the emergency without the threat of personal liability
  • temporary suspension of the use of statutory demands and a restriction on winding up petitions, where a company or CIO cannot pay its bills due to the coronavirus emergency
  • support for viable companies struggling with debt to restructure under a new procedure – these provisions do not apply to CIOs

You can get more detailed information on all these provisions from the Insolvency Service

The act also introduces new provisions about holding member meetings. You can find more information on these provisions in our guidance on AGMS and other meetings

The Gov.uk pages around Guidance for the Charity Sector also contain lots of useful links and resources.

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