All (Temporary Restrictions) Must Come to an End…

The UK government has announced that, from the 1st October 2021, the temporary measures brought in to support businesses from insolvency during the pandemic will be phased out.

Those of you who have been following my previous articles on this topic will know that, back in June 2020, the Corporate Insolvency and Governance Act 2020 (CIGA) came into force.

Corporate Insolvency and Governance Act 2020

The Act introduced a variety of both permanent and temporary measures to seek to rescue companies in financial distress as a result of the COVID-19 pandemic and the resulting economic crisis.

The initial temporary measures under CIGA included:

  • Preventing the presentation of a winding-up petition on the basis of a statutory demand, where that demand was served between 1 March 2020 and 31 December 2020 (the relevant period); and
  • Preventing a creditor from presenting a winding-up petition during the relevant period, unless there are reasonable grounds for believing that:
      • coronavirus has not had a financial effect on the company; or
      • the situation would have happened even if coronavirus had not had a financial effect on the company.

When initially introduced back in June 2020, these temporary measures were only meant to remain in place for a number of months. However, as COVID continued and the financial impact on companies persisted, the temporary measures were extended further and further, remaining in place until 30th September 2021.

No Further Extensions…

Like most things, they must now come to an end and the Government has now announced that there will be no further extensions and instead the temporary insolvency restrictions protections will be lifted. Instead, new targeted measures to support small business and commercial tenants will be introduced.

The new legislation, due to be introduced through a Statutory Instrument, will:

  1. Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more.
  2. Require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

These measures are currently scheduled to be in force until 31 March 2022.

We all knew this day would come and, as the world returns to ‘normal’ (whatever that means!) we must say goodbye to the temporary measures introduced to help us deal with the COVID pandemic.  This news will come as a welcome relief for those businesses who are owed large sums by other companies and wish to recover the same, but undoubtedly it will be a concern for those businesses who have accumulated debt over the past 18 months and will now be forced to pay up.

Points to Note

Businesses, and individuals, should keep an eye out for any Statutory Demands that may arrive in the post as these become valid again from October 1st. Remember that Stat Demands served to your office address will still count as good service, even if staff continue to work from home – so make sure someone is checking post regularly.

The increase in the debt threshold for Winding Up Petitions is a big one! The previous limit was only £750, so it really is quite a jump moving this to £10,000. This will be a welcome relief for companies who were at risk of winding-up over reasonably small sums and one would think that Winding-Up proceedings will now be restricted to companies facing much larger debts.

If you have any questions or queries regarding these changes to CIGA, or if you are concerned about owing debt, or indeed want to recover debt – please contact Krystene on;

Tel 0113 258 0033

Email krystene@travlaw.co.uk

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