The government has announced the first major steps in phasing out the temporary insolvency measures which have protected debtors during the pandemic.

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The government has announced the first major steps in phasing out the temporary insolvency measures which have protected debtors during the pandemic.

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Revisions to the temporary insolvency restrictions will:

 

  1. Require creditors to give debtor businesses 21 days to make payment proposals before a winding up petition may be presented; and
  2. Once the necessary notice has been given, permit winding up petitions to be presented for debts of £10,000 or more except in relation to commercial rent arrears

These measures will come into force from 1 October 2021, to continue in force until 31 March 2022. 

 

The government explains the continuing restriction on winding up for commercial rent arrears as intended to protect businesses carrying a “one time” burden of unpaid rent accrued during the pandemic, which it intends to deal with through an official “rent arbitration” scheme.

 

The announcement appears to signal an intention to open the door to creditor action and allow pressure to be put on businesses which have relied on the temporary measures to delay or avoid payment of their trading debts.  

 

Following the initial announcement on 9 September, the proposed implementing regulations to be made under the Corporate Insolvency and Governance Act 2020 have just been released.  These will need to be considered carefully to see whether the government’s rhetoric is genuinely reflected in the proposed legislation.  Both creditors and debtor businesses with significant non-rent obligations should look out for further detailed analysis of the draft legislation for a sense of the hurdles which will actually remain for creditors after 1 October.

 

The government’s press release can be reviewed at https://www.gov.uk/government/news/end-of-temporary-insolvency-measures

 

The legislation can be reviewed at https://www.legislation.gov.uk/uksi/2021/1027/pdfs/uksi_20211027_en.pdf

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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