Struggling businesses given extra time to avoid insolvency
Businesses struggling with debt due to the Covid-19 crisis have been given extra breathing space to help them avoid insolvency.
A temporary measure introduced by the Corporate Insolvency and Governance Act restricting the use of statutory demands and winding-up petitions, which was due to expire on 31 December 2020, has been extended to the 31 March 2021.
This will continue to help protect companies from aggressive creditor enforcement action because of coronavirus related debts and give breathing space to companies to negotiate or restructure.
In addition, the temporary removal of the threat to directors of personal liability for wrongful trading has been extended until 30 April 2021.
The government also announced that companies and other qualifying bodies with obligations to hold AGMs will continue to have the flexibility to hold these meetings virtually until 31 March 2021. This means that shareholders can continue to examine company papers and vote on important issues remotely.
Termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can protect their business if necessary.
The modifications to the new moratorium procedure, which relax the entry requirements, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months.
Businesses will also be protected from the threat of eviction until the end of March. This extension will protect businesses that are struggling to pay their rent due to the impact of COVID-19.
Please contact Neil O'Callaghan if you would like more information about the issues raised in this article or any aspect of debt collection and credit control.