The Corporate Insolvency and Governance Act 2020 (CIGA) came into force on 26 June 2020, having been fast-tracked through Parliament. Although most of CIGA relates to insolvency law, the Act also makes some temporary changes to company law in the UK. The purpose of these is to give companies greater flexibility to deal with the difficulties caused by COVID-19.

Key changes

Over the past few weeks, the UK government, regulators and other bodies have moved to help businesses navigate the unprecedented disruption caused by the COVID-19 pandemic. We start this briefing with a round-up of key changes in the areas of company law and corporate finance regulation.

Filing accounts

The Court of Appeal has considered whether interim dividends paid to a shareholder at a time when the company did not have sufficient distributable reserves, making the payments unlawful, could later be reclassified as salary payments.

Facts

The Court of Appeal has given guidance on when the duty of directors to have regard to the interest of creditors arises. This is an important point, as the general statutory duty of a director to promote the success of the company for the benefit of the company's members is expressly subject to the rules on creditors' interests. The court's decision also considers whether a dividend payment can be challenged as a transaction at an undervalue under section 423 of the Insolvency Act 1986.

Facts

New Federal Law No. 266-FZ dated 29 July 2017 (the Amendment Law) introduces notable changes to Russia’s insolvency rules. Importantly, the law does away with the original provisions on vicarious liability of controlling persons in RF Law No. 127-FZ on Insolvency of 26 October 2002 (the Insolvency Law). The Amendment Law expands this concept in a series of new clauses. The rules came into force 30 July 2017.

A recent challenge in the High Court by liquidators to recover assets from a director of an insolvent company has highlighted various points of company law. In particular, the court had to consider directors' authority, share buybacks, and transactions between a company and its directors.

The claimant (D) was the managing director and controlling shareholder of the defendant company (the Company). The Company at first had one other director, D's wife, and later a second (W).

The liquidator challenged three transactions:

The new personal bankruptcy law enters into force on 1 October 2015

The new personal bankruptcy law enters into force on 1 October 2015. Individuals will now be allowed to go bankrupt while creditors are left to struggle. The rules have caused much apprehension and it remains to be seen how business will operate in the new environment.