Provisions preventing businesses from entering insolvency will be phased out from next month, the Government has announced.
The measures – launched in June last year to protect firms impacted by coronavirus disruption – will be replaced by new rules designed to help companies “get back to their feet”.
According to the Insolvency Service, the temporary measures brought in to support businesses at risk of insolvency will be replaced from 01 October.
The temporary rules, introduced under the Corporate Insolvency and Governance Act 2020, ensure that viable businesses in financial distress as a result of the Covid-19 lockdown were not placed into insolvency unnecessarily.
But now coronavirus constraints have been lifted, restrictions on creditor action will be phased out, the Government said.
They will be replaced by a new set of measures – in place until 31 March 2022 – that are intended to help “smaller companies”, such as high street businesses and those in the hospitality and leisure sectors, recover before creditors can take action to wind them up.
HM Treasury said the new provisions 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.
Commenting on the announcement, 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.”For help and advice with related matters, please get in touch with our corporate team today.