Insolvency measures extended

The Government has announced that it will extend a number of temporary measures brought in by the Corporate Insolvency and Governance (CIG) Act, which were due to expire on 30th April until the end of June.

The measures being extended till the end of June 2021:

• Statutory demands and winding-up petitions will continue to be restricted to protect companies from creditor enforcement action due to debts related to coronavirus (COVID-19).
• Small suppliers will not have to continue to supply a business in insolvency. However, larger suppliers will not be able to cease their supply or ask for additional payments while a company is going through a rescue process.
• Entry into a moratorium will remain relaxed and a company will be able to enter a moratorium if they have been subject to an insolvency procedure in the previous 12 months. These measures will be extended until 30 September 2021.

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.”

In response to the amended measures, Insolvency and restructuring trade body R3 is urging directors of Covid-hit businesses to make the most of the time granted by the Government’s extension of temporary insolvency measures to plan for the future.

R3 is calling on company directors to use this additional time to plan for when these measures and other Government support schemes end, and to seek advice about the options open to them to address their financial issues.

Duncan Swift, Immediate Past President of R3, said “The Government’s decision to extend the CIG Act temporary insolvency measures will be a welcome boost for firms that are struggling as a result of the pandemic.”

“It also provides directors of these firms with more time to plan for when these measures – and Government support initiatives like the furlough scheme – end, and we urge them to make the most of this.”

“We’ve been through a period of unprecedented Government support, and directors need to plan for how they will manage when these measures are wound down – especially as it will take time for the business environment to return to how it was before the pandemic started.”

“Now is the time for anyone with worries about their business finances to seek professional advice. Seeking this now rather than later typically provides more options to deal with challenges faced by the business, more time to decide which option is most suitable, and more time to implement the most appropriate solution.”