Temporary Insolvency Measures Are Lifted
With the lifting of temporary insolvency restrictions, new targeted measures are introduced to support small businesses and commercial tenants.
The Corporate Insolvency and Governance Act was introduced in June 2020 to protect companies in post-pandemic financial distress from creditor action. The Act prevented businesses affected by the lockdown industry restrictions on trading from being wrongly forced into insolvency. However, with the economy returning to normal trading conditions, such temporary measures will be phased out from 1st October.
The new measures are designed to help smaller companies affected by the pandemic regain strength. They will be in force until 31st March 2022, giving businesses, particularly high streets and the hospitality and leisure sectors, more time to improve their finances before creditors can take action against them.
Under the new legislation:
- For the time being, businesses will gain protection from creditors insisting on repayment of relatively small debts. The current debt entry point will be increased for a winding-up petition of up to £10,000 or more.
- Creditors will have to seek proposals for payments from a debtor business. They will get 21 days for a response before they can proceed with winding up action.
Business Minister Lord Callanan said:
“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 are advised to continue paying contractual rents where they can. However, commercial landlords will not be able to bestow winding-up petitions against companies, asking them to repay commercial rent arrears built up during the pandemic.
Regarding commercial rent only, tenants will continue to be protected from eviction until 31st March 2022. In the meantime, the government will implement a rent arbitration scheme to deal with commercial rent debts accumulated during the pandemic.
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