The Charity Commission has updated its coronavirus guidance on insolvency protections for charitable companies and CIOs.
Provisions have been introduced by the Corporate Insolvency and Governance Act 2020 to help businesses continue operating and avoid insolvency during this period of economic uncertainty due to COVID-19.
These provisions apply to charitable companies, and the majority of the provisions also apply to Charitable Incorporated Organisations (CIOs).
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. The additional temporary moratorium provisions for coronavirus have been extended until 30 September 2021
- limiting termination clauses in supply contracts, to provide for continuity of supplies so companies and CIOs can carry on operating. The additional temporary exemption for small entity suppliers during coronavirus have been extended until 30 June 2021
- 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. These provisions which applied between 1 March and 30 September 2020, have been reinstated, so that it won’t be possible to bring these wrongful trading claims in relation to losses caused by trading between 26 November 2020 and 30 June 2021
- 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. These provisions have been extended and apply until 30 June 2021
- 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.
If you think your charity might be at risk of insolvency, you should speak to an insolvency practitioner for advice as soon as possible.
For further information, please see the Charity Commission’s guidance on managing financial difficulties caused by coronavirus