Provisions preventing insolvency during the coronavirus pandemic will be extended, the Government has confirmed.
It means the restrictions on statutory demands and winding up petitions will remain for a further three months until 30 September 2021.
Launched as part of the Corporate Insolvency and Governance Act in March 2020, the temporary rules are designed to protect vulnerable businesses from aggressive creditor enforcement where their debts relate to the pandemic. The measures being extended include:
- Statutory demands and winding-up petitions will continue to be restricted to protect companies from creditor enforcement action due to debts related to Covid-19
- 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.
Welcoming the move, Dr Roger Barker, Director of Policy & Corporate Governance at the Institute of Directors, said: “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.”
According to the latest statistics, almost eight in 10 (80 per cent) small and medium-sized businesses say their revenue has declined during the pandemic, while one in four (25 per cent) are concerned about defaulting on loans and a similar number (28 per cent) doubt their ability to sustain their supply chains.
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