The Measures were introduced to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily. As the economy returns to normal trading conditions, the restrictions on creditor actions will now be lifted.

New measures will be introduced to help smaller companies get back on their feet which will offer them further breathing space to trade their way back to financial health before creditors can take action to wind them up. This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest by closures during the pandemic.

The new legislation will:
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
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.
The measures will be in force until 31st March 2022.

The Minister for Corporate Responsibility, Lord Callanan, previously expressed his concerns that the threat of aggressive creditor action could have hindered companies in their efforts to recover as the economy was cautiously reopened.

Lord Callanan commented that “with the success of our vaccine rollout means we are seeing life and the economy returning to normal with a strong rebound, and the time is right to lift the insolvency restrictions that were needed during the pandemic.”

“At the same time, we know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures protections will help them to do that.”

Businesses should 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.

Continuing the restriction on winding up in respect of commercial rent only supports the announcement on 16 June that commercial tenants will continue to be protected from eviction until 31 March 2022, whilst the government implements a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic.

Restart BTi recognises the difficulties faced by directors caused by the pandemic during the last eighteen months. We urge your clients to use this time to seek advice from us, as qualified professionals; and to do so as early as possible. This should allow your clients to access the widest range of options, giving them more to decide how they will move forward.

If you or your clients would like to discuss any issues arising from this article or any other insolvency issue then please do not hesitate to call us on 01246 959388.