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.

Company accounts filing requirements

Eligible companies may be able to apply for a 3-month extension (on this page, you will find a link to the online application form).

Company meetings

There were 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.

Currently, there are no restrictions on gatherings. This means that companies are not able to stop shareholders attending (either entirely or by imposing a limit on numbers). However:

  • A company can strongly recommend that shareholders do not physically attend in the interests of health and safety, in light of the continuing COVID-19 pandemic.
  • Companies can legally organise hybrid meetings (i.e. partly virtual and partly attended in person) if there is nothing in their articles that expressly prevents them doing so.
  • Companies should exercise some caution and follow relevant government guidance when planning a general meeting, including, for example, planning for reduced attendance but making a contingency plan for a change to a bigger venue capable of accommodating a larger shareholder attendance if necessary.
  • Companies should offer as much electronic engagement with shareholders as is possible and proportionate, whether before, during or after the meeting, to give shareholders confidence they can participate effectively without the need for physical attendance.

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 would continue until 30 June 2020. On 25 June 2020, the Corporate Insolvency and Governance Act 2020 was passed, which further extended 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 COVID-19. 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.

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