From 1st October 2021, the temporary measures installed by the government to aid businesses in the UK avoid insolvency during the pandemic will be phased out and replaced with what are being described as ‘more targeted measures’ by the Chancellor.
The initial measures – introduced via the Corporate Insolvency and Governance Act in March 2020 – were developed to help those businesses facing critical cashflow problems. In essence, they were a form of protection from creditor action for any debt accumulated from outgoings and paying staff wages amid a lack of income.
The new legislation outlined by the Chancellor aims to support small businesses and commercial tenants, in particular, from creditor action relating to the repayment of unsubstantial debts. As such, the current debt threshold for a winding-up petition will be temporarily raised to cover those in excess of £10k.
Additionally, creditors will be required to seek proposals for payment from a debtor business and then wait for 21 days for a response, before proceeding with a winding-up petition.
Intended to last until at least 31st March 2022, the targeted legislation will cover England, Scotland, and Wales. Northern Ireland, meanwhile, will implement similar legislation to ensure cohesiveness across the UK.
As it stands, there are thousands of winding-up petitions across the UK on the cusp of being sent out to struggling businesses in various sectors. The key question for many of the recipients, then, is what can be done if a winding-petition is received after October 1st?
At PKF Smith Cooper, we have an abundance of experts whose knowledge of creditors and insolvency can be utilised to identify effective, practical solutions moving forwards.
To find out more, please get in touch with our team today and see how they can help you navigate this next stage.