Last time insolvency measures extended for businesses – or the last, last time?
The government announced that current restrictions on statutory demands and winding up petitions will remain in place for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.
The last sentence here is crucial – “where their debts relate to the pandemic”.
There could easily be test cases being brought where creditors argue that the pandemic was immaterial in the case, especially if debts were incurred before March 2020 when the first lockdowns were implemented.
In addition to the ongoing ban on actions, larger suppliers are still unable to cease supplies or ask for additional payments from customers that are undergoing a business rescue process, although small suppliers don’t have to continue to supply companies in insolvency.
Also if a business has been subject to an insolvency procedure in the previous 12 months such as administration or a company voluntary administration (CVA), they will be able to enter an insolvency moratorium with relaxed criteria until the September 30th expiry date.
Lord Callanan, Minister for Corporate Responsibility, said: “We’re extending these important measures to give businesses the extra breathing space they need as we cautiously reopen the economy.
“With the threat of aggressive creditor action and insolvency eased, companies will be able to focus all their efforts on their recovery.”
Reaction from retail landlords is understandably negative to the extension of the rent & eviction moratorium until the end of March 2022 pointing out that retailers can pay bonuses and dividends to shareholders, and while they have to start paying business rates again from July, rent can be waived for a further nine months.
By the time it’s due to end the commercial rent moratorium will have been in place for two whole years.
The British Property Federation argues that local authorities will also suffer if unscrupulous businesses exploit the moratoriums and pay no rent.
They estimate that since the restricted measures were brought in, property owners had collectively lost £6 billion in revenue or £1 in every £6 of rent due.
A spokesperson for R3 said: “Many companies across the country will appreciate the action the Government has taken – particularly given the delay to the easing of lockdown announced last week.
“While the extension of these measures will benefit many companies, as time goes on the Government will need to consider the impact on creditors – who have staff and overheads to pay themselves.
“The decision gives directors and business owners a further and possibly final window to plan how they will take their business forward when these temporary measures end.
“We urge them to use this time to seek advice from a qualified professional and to do so as early as possible, so they can benefit from the broadest range of options available and have a greater time period to decide how they will move forward.”
We couldn’t agree more.
Businesses with financial challenges have yet another opportunity to decide what direction they want their company to go in and make concrete decisions right now to give themselves a fighting chance of making it happen.
You could forgive cynical directors who might want to muddle through thinking: “well, this is the fifth last chance so why not wait until the next one?”
Probably because this new deadline coincides with the formal end of the CJRS furlough scheme which would be harder to extend. It will also see thousands of bounce back loans and CBILS borrowers first repayments come due after the first deferral period from earlier this year has ended.
Also three months time will see many thousands more citizens vaccinated and the end of the summer holiday season too.
If you want to improve the odds of your business being around in three, six or a hundred month’s time – get in touch with us today to arrange a free initial consultation.
Then you can really concentrate on pursuing your plans, not frantically consulting the calendar every few weeks for the latest latest deadline.