News & Insights
The Government have issued a press release confirming that temporary insolvency restrictions protections will be phased out from the 1st of October.
Companies in financial distress as a result of the pandemic have been protected since June last year through the Corporate Insolvency and Governance Act 2020.
This was to ensure that viable businesses affected by trading restrictions during lockdown periods were not forced into insolvency. As the economy returns to normal trading conditions, restrictions on creditor actions will be lifted.
New measures will be brought in to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up. This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.
The new legislation will:
These measures will be in force until 31 March 2022.
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.”
However, commercial tenants will still be protected through until the end of March 2022. The existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.
In the meantime, the Government are in the process of initiating a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic.
The CTA is currently in consultation with the Government about how this scheme can be best implemented.