New Corporate Insolvency and Governance Act 2020: an extension of support and relaxing of rules for schools

Schools have not been isolated from the financial and social effect of the pandemic. In many cases, they are seeing challenges which affect the way they run in a much more severe way than other businesses. The pandemic has, so to speak, torn up the rule book on how many schools are run and they are having to reassess policies, procedures and their finances. The Corporate Insolvency and Governance Act 2020 (CIGA) has provided some relief to schools which are companies or CIO charitable incorporated organisation (CIO).

The difficulty in having face to face general meetings for schools, even where required in its governing document, has been recognised and relief granted. Until 30 December 2020, even where it is not allowed, schools can hold general meetings virtually or over the telephone. The school can also require that voting is electronically or by other means. (NB for many schools, their structure means that the governors will be both directors and members; this provision only applies to general meetings for members.) Schools should record this in the minutes of the meeting and still comply with other requirements, such as ensuring there is a quorum and notice of meetings.

Schools have also been able to benefit from the ability to delay AGMs but this expired on 30 September and schools should resume following the normal rules in their governing document for AGMs.

There has also been publicised protection for schools facing insolvency. Whilst some protective measures lapsed on 30 September, this still includes the following:

  • Moratoriums until 30 March 2021 preventing creditors from bringing winding up petitions, enabling schools to carry on trading and look at options for restructuring or other rescue options
  • A limitation on the application of termination provisions in contracts even if schools meet insolvency criteria until 30 March 2021;
  • Temporary suspension of statutory demands and winding up petitions up to 31 December 2020 in situations where, due to the COVID 19 pandemic a school cannot pay its bills.

In addition to the statutory reliefs available, schools can also consider other measures during the pandemic. These include:

  • Taking out a Coronavirus Business Interruption Loan. We have acted for a number of schools and banks in taking these out, where security is given by way of a charge over the school property or a debenture.
  • Reviewing and amending your school’s governing document to allow for easier management of the schools affairs. Examples could be permanently allowing virtual general meetings or reducing the number of governors required.
  • Considering use of reserves or funds earmarked for particular projects. For restricted funds (those donated for a specific purpose), it may be possible to obtain consent of the Charity Commission to change this limitation in certain circumstances.