End of temporary insolvency measures

October 1, 2021

Temporary measures brought in to support businesses from insolvency during the pandemic are being phased out from today 1 October 2021.

Companies in financial distress as a result of the pandemic have been protected from creditor action since June last year, through the Corporate Insolvency and Governance Act 2020.

While this protection comes to an end , new measures are brought in to help smaller companies trade their way back to financial health before creditors can take action to wind them up. The Government says this will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.

Under the new Regulations, the current debt threshold for the issuing of a winding up petition is temporarily increased to £10,000 or more, protecting businesses from creditors that insist on repayment of smaller debts.

Secondly, creditors will be required to seek proposals regarding repayment from debtor businesses, with the business being given 21 days to respond before the creditor can proceed with winding-up action.

These measures will be in force until 31 March 2022.

The Government is urging businesses to pay contractual rents where they are able to do so. However, the existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.

Additionally, the restriction on winding up petitions with regard to commercial rent will continue, in line with the Government’s previous announcement that commercial tenants will continue to receive protection from eviction up to March 31 2022. This will give the Government time to implement a rent arbitration scheme to deal with commercial rent debts that have been accrued since the start of the pandemic.

Said Giles Maynard-Connor QC: “Insolvencies (both corporate and personal) are expected to increase following the Pandemic. Our specialist practitioners are ready to assist our clients, but the new regulations will soften the blow for many, and no doubt they will be welcomed by those who have been hit hard. ”

The relevant (now revised) Regulations are :  The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021 (SI 2021/1091)