The Government has announced the extension of temporary insolvency measures which includes the restrictions on issuing of winding up petitions and statutory demands.
The change to the regulations will mean restrictions on statutory demands and winding up petitions will remain for a further three months until 30th September 2021.
The measures were introduced in the Corporate Insolvency and Governance Act in March 2020, including protecting businesses from aggressive creditor enforcement and removing personal liability on company directors, and have been previously extended on a number of occasions.
Minister for Corporate Responsibility, Lord Callanan, said “We’re extending these important measures to give businesses the extra breathing space they need as we cautiously reopen the economy and look to build back better from the pandemic. With the threat of aggressive creditor action and insolvency eased, companies will be able to focus all their efforts on their recovery.”
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.”
Christina Fitzgerald, Vice-President of insolvency and restructuring trade body R3, said “Many companies across the country will appreciate the action the Government has taken today – particularly given the delay to the easing of lockdown announced earlier this week.”
“Trading conditions have improved recently, but the Prime Minister’s decision to delay the removal of the final lockdown measures underlines that we’re still in choppy economic waters.”
“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. Balancing these interests is a difficult task for the Government.”
“However, today’s decision also gives directors and business owners a further, and possibly final, window to plan how they will take their businesses 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.”
These temporary measures will benefit many companies however it is thought it will also spell the end for many companies that are waiting to be paid.
It has been highlighted that unpaid invoices are on the increase. Any further measures will need to be carefully considered as billions is currently outstanding in unpaid invoices. It is small businesses that are being hit the hardest by these latest ‘temporary’ covid business measures.
There has to be a way out out of this as quickly as possible or the other side may not be quite as rosy as people hope.