A personal service given in a relaxed and friendly fashion.
- AuthorGraeme Weir
(Corporate Insolvency & Governance Act 2020 (Coronavirus))
(Amendment of Schedule 10 Regulations 2021)
The temporary insolvency restrictions previously put in place by the government to ease financial pressures on business are being lifted. Instead new measures have been implemented to support small businesses and commercial tenants.
Statutory Demands & Winding Up Petitions
Previously, under the Corporate Insolvency and Governance Act 2020, creditors were restricted from serving statutory demands or presenting Winding Up Petitions for debts related to the coronavirus period.
With effect from 1st October 2021 until 31st March 2022, there will no longer be restrictions on the presentation of statutory demands. Significantly however, the threshold for presenting a Winding Up Petition has been increased from £750.00 to £10,000.00 which may reduce the prospects of smaller businesses being made the subject of insolvency proceedings.
It is however possible for more than one creditor to join forces with another creditor to present a Winding Up Petition if the aggregate of their respective unpaid debts exceed £10,000.00. It is still hoped that the new measures will help smaller companies get back on their financial feet, affording them more time to restore their financial wellbeing. It was the government’s intention to particularly benefit high street businesses and those working within the hospitality and leisure sectors, who have arguably been hit hardest during the pandemic.
Before creditors can proceed with any winding up action to place a company into liquidation, creditors are required to seek repayment proposals from a debtor business, affording them a 21-day period in which to respond. In practical terms however, it is still likely that High Street banks will consider freezing company bank accounts on learning of the issue of a Winding Up Petition, so that they can comply with their obligations under the Insolvency Act 1986. Under the Act any company property/assets/funds transferred between the date of the Winding Up Petition being lodged and the date any Order is granted would become void and can be clawed back.
Directors Liability for “Wrongful Trading”
Under the earlier provisions, the government had sought to provide some reassurance to company directors by suspending their liability for potential wrongful trading. Those provisions expired on 30 June 2021. This may provide some comfort to creditors that company directors should be conscious of their obligation, not to continue trading if to do so would worsen the position of the company. Potentially the company’s liabilities may also be re-directed to such directors in their personal capacity.
Commercial Tenants – Protection from Eviction
Commercial business tenants will continue to be protected from eviction until 31 March 2022 whilst the government implements a rent arbitration scheme dealing with any commercial rent debts accumulated during the pandemic. The landlord is also precluded from seeking to terminate the lease until it has provided 14 weeks notice of that intention. Those restrictions will remain in place until 31 March 2022.
The government still wishes to retain its emergency powers under the Coronavirus Act until March 2022 consequently depending on pandemic outcomes in the impending winter these restrictions may still be subject to review.
If you are a creditor and wish to be made aware of the various options open to you in relation to the recovery of outstanding debts please do not hesitate to contact Graeme Weir via firstname.lastname@example.org (direct dial number 01233 648406). Similarly, if you are being placed under pressure from creditors as regards any debts owed to them please do contact Graeme to discuss options including negotiating repayment plans etc.
This note is intended to be for general guidance only and is not a substitute for specific advice. It is based upon our understanding of the applicable rules as at October 2021 and may be affected by subsequent changes.
© Kingsfords Solicitors Limited. All Rights Reserved