The Insolvency Service has announced that temporary measures brought in to support businesses from insolvency during the pandemic will be phased out from 1st October.
Companies in financial distress as a result of the pandemic have been protected from creditor action since June last year, through the Corporate Insolvency and Governance Act 2020. This was to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily. As the economy returns to normal trading conditions, the 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:
1. Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding-up petition to £10,000 or more.
2. Require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.
The measures will be in force until 31st March 2022.