Government measures in key jurisdictions 4th edition - Flipbook - Page 150
UnitedKingdom
Winding Up Petitions and Statutory Demands – The Act introduced temporary provisions prevent
aggressive creditor action against companies. Under the Act, statutory demands will not be able to be
used as the basis for issuing a winding up petition against a company. This provision applies to all
statutory demands served on any company between 1 March 2020 and 30 September 2020. The
provision prevents statutory demands served in this period from forming the basis of a winding up
petition presented on or after 27 April 2020.
•
In addition, the Act restricts winding up petitions from 27 April 2020 to 30 September 2020, unless the
petitioning creditor has reasonable grounds for believing that the coronavirus crisis has not had a
“financial effect” on the company (i.e. that as a consequence of coronavirus or for reasons relating to
coronavirus, the debtor’s financial position has worsened). Although no announcement has been made
to date, these changes brought in by the Act may be subject to further extension should the UK
Government see it fit to do so.
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
•
As yet there has been no statutory Government intervention into the workings of UK contracts
between commercial entities and the normal rules apply. However, the Government is strongly
urging contracting parties to act fairly, reasonably and in the national interest when seeking to
enforce contractual rights and remedies, in an attempt to minimise the impact the coronavirus will
have on jobs and the wider economy. Legislation may follow to give teeth to this guidance.
•
In the UK there has been an increased focus on contractual small print, such as the precise wording of
force majeure clauses within contracts. The sort of unforeseen disruption to lives and businesses that
we are now seeing is exactly what one imagines a force majeure clause is designed to respond to. In
many cases the pandemic or the restrictions the Government has now advised to limit its spread
will fall into a contractual definition of force majeure, however the clause itself will need to be
scrutinised carefully in order to determine whether or not it is engaged.
•
If a force majeure clause is engaged, typically it will suspend the performance of the affected party’s
obligations under the contract,for the duration of the force majeure event.
•
If performance of a contract may be significantly affected it is crucial to review the terms of your
contracts so you understand your rights and obligations and to allow you to scenario-plan
accordingly. Contracts in the time of Covid-19: Force majeure and frustration. Particularly with longstanding contracting partners, many businesses are trying to agree a mutually acceptable way
forward, including varying contractual obligations and sharing the exposure more fairly (in which
case any variations should comply with the formalities required by the original contract).
•
Public sector bodies are being strongly encouraged by the Government to provide financial support to their atrisk suppliers to increase the financial resilience of their supply chains. The Government is fearful of a
plethora of disputes that could arise as a result of the chaos caused by the coronavirus crisis and is
encouraging parties to resolve contractual disputes responsibility, using alternative dispute resolution
procedures where possible, before commencing formal litigation.
•
The Government is fearful of a plethora of disputes that could arise as a result of the chaos caused by
the coronavirus crisis and is encouraging parties to resolve contractual disputes responsibility, using
alternative dispute resolution procedures where possible, before commencing formal litigation.
•
The Corporate Insolvency and Governance Act (discussed in the Insolvency section above) came into
force at the end of June 2020. It introduced a restriction on triggering ‘termination for insolvency’-type
provisions in contracts as such terminations may jeopardise attempts to rescue companies at risk of
insolvency due to the current crisis. The restrictions will only apply to suppliers who have contractual
rights to terminate against their customers. It does not apply to termination rights after an insolvency
procedure has commenced. There is also a temporary exemption for small suppliers.
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