The government has extended temporary insolvency measures supporting businesses during the pandemic till the end of June 2021.
The measures in the Corporate Insolvency and Governance Act which are being extended till 30 June 2021 include:
- The temporary suspension of statutory demands and winding-up petitions to protect companies from creditor enforcement action due to debts related to Covid-19
- Small suppliers will not have to continue to supply a business in insolvency. Termination clauses are still prohibited, so larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process.
- the temporary removal of the threat of personal liability for wrongful trading from directors has been extended from 30 April 2021 to 30 June 2021.
Entry into a moratorium will remain relaxed and it is now possible for a company to enter a moratorium even if they have been subject to an insolvency procedure in the previous 12 months. These measures will be extended until 30 September 2021.
The extension of these measures is eminently sensible at such a critical time in the ongoing recovery process of the economy and the country. Without a phased and controlled strategy surrounding the withdrawal of the Covid support initiatives, company’s and businesses alike face the very real risk of being unable to cope.
Because of this, it is vital that business owners start planning their strategy for not only dealing with the cancellation of the support initiatives but also how they manage the financial requirements of trading going forward. It is especially important to bear in mind, that the funds provided/ not called for under the initiatives require to be repaid. Planning now will minimise pressure on cash flow and maximise available resource going forward.
Talk to your advisors if needed, some businesses are going to have problems, anticipating these allows for alternative solutions including negotiating extra time for repayment but never wait until the last moment as time is critical.
To discuss any corporate recovery or insolvency issues you may have, please contact Jeremy Oddie or Julie Webster below.