End of Temporary Insolvency Measures

September 10, 2021

The Government has announced that temporary insolvency protections in place since June 2020 shall now be phased out from 1 October 2021.  Since the start of the COVID pandemic, companies directly impacted have been protected from creditor action through the Corporate Insolvency and Governance Act 2020.  These protections have included a ban on debtors presenting winding up petitions.

Whilst the phasing out of protections will begin on 1 October, the updated legislation will:

  • Continue to protect businesses from creditors demanding 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.

These new measures will be in force until 31 March 2022.

It should be noted that the existing restrictions on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic will remain in place.  This will mean 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.

These temporary measures have no doubt protected businesses from the significant impact of the COVID pandemic and allowed time for owners to objectively assess the impact of the pandemic on their business and implement necessary changes.  However, where stress or destress within a business remains, the importance of taking early advice is essential.

Proactively seeking early advice significantly broadens the range of options available to businesses and provides time for directors, management teams and advisors to identify and implement appropriate restructuring strategies to deliver a successful turnaround.

Please contact Chris Ferguson, Head of Recovery, on either 0191 256 9500 or chris.ferguson@r-m-t.co.uk, should you or your clients wish to discuss these changes further.




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