Certain key insolvency measures to be phased out

New Legislation
Published: 10th September 2021
Area: Corporate & Commercial

Share This

Key insolvency measures

Creditors will be able to issue Winding up Petitions against individual corporate debtors owing more than £10,000 from next month, even where debt may be “Covid related”. Commercial rent arrears are still excluded.

The Government has announced that measures put in place to protect business from insolvency during lockdown and the pandemic are to be phased out from 1 October 2021.

The Corporate Insolvency Governance Act 2020 was brought into force in June 2020 to prevent creditors from issuing winding up petitions and enforce insolvency.

Updated legislation will:

  1. See the debt threshold for a winding up petition be raised to £10,000 or more
  2. Require creditors to seek proposals for payments from a debtor business and allow 21 days for a response before proceeding with a winding up petition.

These measures will be in force until 31 March 2022, when it is expected that legislation will return to pre-pandemic measures.

What this means for businesses

Those will smaller debts will have more time to rebuild balance sheets and reserves ahead of the March 2022 deadline.

Those with larger debts, should be aware that the threat of the business being wound up (which has been very much in the background for many months) will now be an important consideration in the viability of the business going forward.

Directors should be looking at all options including; restructuring, refinancing and negotiations with creditors to avoid facing winding up petitions next month.

What this means for creditors

Creditors should consider the options available to them, where they have corporate debtors owing £10,000.00 or more. Where the debt cannot said to be legitimately disputed, businesses can again look to the demand and petition route as a means of enforcement.

We are expecting to see many of our creditor clients use this procedure straightaway, particularly against those debtors who are considered to be zombie companies or those who have not engaged or co-operated with them over the last year.

For debts less than the £10,000 threshold, creditors should continue negations with debtors and recover what they can through the courts or mediation.

What this means for landlords

For landlords there is no change to the legislation and tenants maintain protection from eviction until 31 March 2022.

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.

Full details of when and how the Government’s rent arbitration scheme will come into force are still to be confirmed.

For support with matters relating to restructuring, contact Andrew.Taylor@shma.co.uk

Get In Contact

Andrew works with companies, insolvency practitioners and lenders on restructuring and turnaround options.

He also advises on formal insolvency issues including the sales of assets and undertakings, validity of security/appointment, asset realisations, director’s conduct and antecedent transactions.

In any situation when things take a turn for the worse, our corporate restructuring and insolvency team work closely and quickly with clients to assess options deliver the best possible commercial outcomes where possible.

Our Thoughts

All the latest thoughts and insights from our team

Soaring gas prices hit struggling energy suppliers

15 Sep


Soaring gas prices hit struggling energy suppliers

Ofgem have this month warned of very high gas prices and have said that […]

Read article Right Arrow

Insolvency in the construction sector

13 Sep

Property Litigation

Insolvency in the construction sector

The pandemic has placed the construction industry under considerable pressure, with it accounting for […]

Read article Right Arrow

SHMA® On Demand

All the latest on-demand content

Life after Furlough

16 Sep

Jon Heuvel, Partner | Nicola Holton, Legal Director

Life after Furlough

If trading conditions have not improved, this possibly spells redundancies and insolvencies. It is […]

Register Right Arrow

Employment: The importance of employee well-being in the workplace and practical issues for employers to consider

21 Sep

Rhys Wyborn, Partner | Virginia Harvey, Partner

Employment: The importance of employee well-being in the workplace and practical issues for employers to consider

In this joint webinar with Brewin Dolphin, we will look at factors to consider […]

Register Right Arrow