Government To End Temporary Corporate Insolvency Measures

Downing Street sign with a lamp post in front of it

Since June of last year, businesses have been protected from creditor action by the Corporate Insolvency And Governance Act 2020 that was introduced in response to the Covid-19 pandemic. In light of the disruption to trading that was caused by the UK lockdowns, the act was introduced to prevent businesses affected by the pandemic from entering corporate insolvency. 

As the economy begins to recover and return to normal trading conditions, the government has announced an end to the temporary corporate insolvency measures. In a press release published on 9 September 2021, the government confirmed the temporary measures that were brought in during the pandemic will be phased out from 1 October 2021. 

Although the announcement marks the start of the withdrawal of legislative support for businesses, the government has emphasised that the withdrawal will be tapered. New legislation will be brought in to help small businesses’ recover before creditors can make winding up orders against them. This is aimed at helping those businesses that were particularly affected during the pandemic, namely the high street and the hospitality and leisure sectors. The new measures that will be in force until 31 March 2022 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.

Commenting on the government’s decision, Business Minister Lord Canallan has emphasised that whilst “the time is right” to lift the temporary restrictions, “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”. That’s why, the above measures will be put into place to support businesses. 

It’s important to note that the temporary corporate insolvency measures will remain in place for commercial landlords. This will prevent landlords from issuing winding up petitions against limited companies to pay commercial rent arrears that built up during the pandemic. Continuing the restriction on winding up orders for commercial rent only, is intended to support the government’s announcement on 16 June that commercial tenants will continue to be protected from eviction until 31 March 2022. This will remain in place whilst the government works on implementing a rent arbitration scheme to deal with commercial rent debts that have been accrued during the pandemic. 

Response to the announcement 

Christina Fitzgerald, who is the Vice President at the insolvency and restructuring trade body R3, has commented that the announcement reflects “the opening up of the economy, and the need to balance the interests of businesses with those of their creditors”, calling the new increase on the debt limit a “welcome adjustment”. 

However, to those concerned about the end to the corporate insolvency measures, Fitzgerald urges them to “seek advice, and do it now”. As Fitzgerald emphasises, business owners that are concerned about corporate insolvency should act as early as possible in order to give themselves more options and to prevent a bad situation from becoming irrecoverable. 

If you are a business owner concerned about the welfare of your company in light of the government’s recent announcement, or are concerned about facing corporate insolvency, our team is here to help. Please don’t hesitate to get in touch with us today for confidential advice. 


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