As the UK Government’s temporary restrictions on statutory demands and winding up petitions are phased out, we recommend a triage approach to overcome the challenges ahead.
The Insolvency Service has announced that temporary restrictions on creditor action, introduced in the Corporate Insolvency and Governance Act 2020, are to be phased out. These temporary restrictions were put in place prevent businesses suffering financial distress, as a result of the Covid pandemic, from being forced into insolvency. Effectively, this means that from 1 October 2021 a business’ creditors can serve statutory demands and present winding-up petitions, albeit that a minimum debt level of £10,000 is required during a phased period ending in spring next year. During this phased period, landlords will still be unable to petition for winding-up in relation to outstanding rent and similar debts.
As we emerge from over 18 months of insolvency restrictions and creditor forbearance, which have resulted in near record lows of corporate failures, what will be the effect on UK businesses now that the protective safety net has been taken away? It is expected that we will see three distinct scenarios moving forward:
In summary, the insolvency emergency room will soon begin to feel the pressure, and directors should be taking early preventative advice, having the status of their company assessed and seeking appropriate remedial treatment.
Financial and operational restructuring and enforcement of security, including investigation, preservation and realization of assets for investors, lenders and companies.
Find out how the insolvency process can be used as a tool to restructure a business and its liabilities to provide a stronger financial footing.