The Government has announced that it has extended temporary insolvency measures to support businesses during the pandemic by a further three months.
The measures, which were introduced in the Corporate Insolvency and Governance Act in March 2020, and include protecting businesses from aggressive creditor enforcement and removing personal liability on company directors, have been extended to the end of June 2021, as outlined below:
- Statutory demands and winding-up petitions will continue to be restricted to protect companies from creditor enforcement action due to debts related to coronavirus
- Small suppliers will not have to continue to supply a business in insolvency. However, larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process
- Entry into a moratorium will remain relaxed and a company will be able to enter a moratorium if they have been subject to an insolvency procedure in the previous 12 months. These measures will be extended until 30 September 2021
Dr Roger Barker, Director of Policy & Corporate Governance at the Institute of Directors, says:
“During the pandemic, it has been essential to provide company directors with the means by which they can sustain inherently viable businesses. An important component has been the temporary suspension of the potential liability faced by directors if they continue to operate a company that is facing financial difficulties. During the exceptional circumstances of the pandemic, this has been an appropriate step for government to take in order to ensure that viable businesses survive and are in a position to contribute to a meaningful economic recovery.”
Andy Pear, Partner, BM Advisory, adds:
“Whilst this is a welcome boost for firms that are struggling as a result of the pandemic, it is clear the Government is increasingly having to balance the interests of creditors and especially landlords with significant rent arrears building up, with the interests of debtors, such that this could be the final extension of these measures.
“Directors now have more time to plan for when the government support initiatives like the furlough scheme will end, as the economy gradually picks up. Now is the time to be planning ahead, especially as it will take time for the business environment to return to how it was before the pandemic.”
Any business owner contemplating their options may wish to seek professional support. Click on the link to find out more about our BM Advisory / Cadence ‘Options analysis – Supporting your clients on the road to recovery’. Alternatively, please contact Andy Pear for advice and assistance.