Law guide: Business start-up

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Coronavirus (COVID-19)

Coronavirus (COVID-19)

Business start-up and coronavirus

In this section you'll find information and updates related to coronavirus that are relevant to the law on starting and running a business.

The UK's response to coronavirus is changing regularly and often very quickly. While we'll continue to make every effort to keep this page up to date, there may be short periods where what you read here is not the latest information available. Where possible we've tried to provide links to official sources, so you can check the current situation.

AGMs and filing requirements

Ordinarily, companies have statutory obligations to hold meetings and to file documentation on the Companies Register. The pandemic has made it difficult to meet these requirements.

Any filing deadlines that fell between 27 June 2020 and 5 April 2021 were automatically extended. For filing deadlines that fall after this, eligible companies may still be able to apply for a 3-month extension.

There were also temporary rules in place that allowed you to hold certain company meetings between 26 March 2020 and 30 March 2021 in COVID-safe ways, even if they didn't adhere to your company's articles of association. This included general meetings, meetings of a class of members, and meetings of delegates appointed by members.

Any such meetings:

  • Need not have been held at any particular place
  • May have been held by electronic or any other means (including the casting of votes)
  • May have been held without any number of those participating in the meeting being together at the same place.

Members of the company did not have the right to:

  • Attend the meeting in person
  • Participate in the meeting other than by voting
  • Vote by particular means.

However, members continued to have a right to vote by some means.

These measures expired on 30 March 2021. However, it's likely that meetings will continue to be required to be held on a closed basis because of regulations in place imposing restrictions on businesses, venues and gatherings during the pandemic.

Based on the government's COVID-19 roadmap, it appears that general meetings will be required to be held on a closed basis until at least 17 May and possibly until at least 21 June.

The Chartered Governance Institute has published guidance to help companies to plan for meetings.

Directors' duties and wrongful trading

On 28 March 2020, the UK government announced that it would temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 for 3 months. On 14 May, the Government announced that this suspension will continue until 30 June. On 25 June, the Corporate Insolvency and Governance Act 2020 was passed, which further extends the suspension period.

The wrongful trading provisions state that if, at some time before the start of a liquidation or administration, a director knew or ought to have known that there was no reasonable prospect of avoiding either outcome, and they failed to take every step to minimise the potential loss to creditors, then a court can require the director to contribute to the company's assets. In other words, a director can incur personal liability for wrongful trading.

The Corporate Insolvency and Governance Act 2020 provides that, in assessing what contribution (if any) a director is to make to a company's assets when considering possible liability for wrongful trading, the court is to assume that the person is not responsible for any worsening of the financial position of the company or its creditors during the 'relevant period'.

The relevant period is the period beginning on 1 March and ending on 30 September 2020, and also the period beginning on 26 November 2020 and ending on 30 June 2021.

The Act does not require the worsening position to be caused by the COVID-19 crisis. The provisions are not available to directors of financial services firms, including insurance companies and banks.

The suspension of the wrongful trading provisions does not, however, provide complete protection to directors. Other claims can still be made that could make directors personally liable. E.g.:

  • Fraudulent trading;
  • Misfeasance;
  • Breaching duties set out in the Companies Act 2006 (including a duty to consider the interests of the company's creditors at the point when the director knows or should know that the company is or is likely to become insolvent); or
  • Where a company enters into transactions that can be clawed-back by an administrator or liquidator.

Directors of companies that are experiencing financial uncertainty and distress and that may become insolvent, need to consider and act in the best interests of their creditors, and document their decisions and thought processes to be able to demonstrate that they have considered these interests in their decision-making.

A director's general duties under the Companies Act 2006 remain unaffected. These are to:

  • act within powers;
  • promote the success of the company;
  • exercise independent judgment;
  • exercise reasonable care, skill and diligence;
  • avoid conflicts of interest;
  • not accept benefits from third parties; and
  • declare an interest in a proposed transaction or arrangement.

New insolvency provisions

The Corporate Insolvency and Governance Act 2020 makes several changes to help companies who are in serious financial difficulty due to coronavirus. For more on this, see our Coronavirus (COVID-19) Debts and debt recovery section.

Tax and other financial help

See our Coronavirus (COVID-19) Debts and debt recovery section for information on the temporary tax and other financial help available to businesses and the self-employed.

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