Temporary Insolvency Measures to end


The Government has announced that the temporary insolvency measures brought in during the Coronavirus Pandemic are to be phased out from 1 October 2021. The temporary insolvency measures, contained in the Corporate Insolvency and Governance Act 2020, are to be replaced by new legislation and new protections for businesses.

Companies in financial distress because of the pandemic have been protected from creditor action since June last year, through temporary measures in the Corporate Insolvency and Governance Act 2020.

This was to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not then forced into insolvency. Now, as the economy returns to normal trading conditions, the restrictions on creditor actions will be lifted.

However, new measures will be brought in to help smaller companies get back on their feet in an effort to give them more time to trade their way back to financial health before creditors can take action to wind them up.

The new legislation 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.

We will see these measures in force until at least the 31 March 2022.

The protection from eviction for commercial tenants will continue until 31 March 2022. The government then intends to introduce a rent arbitration scheme to deal with rental debts which have arisen as a result of the pandemic. The Government announced:

‘Businesses should pay contractual rents where they are able to do so. However, the existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.

Continuing the restriction on winding up, in respect of commercial rent only, supports the announcement on 16 June that commercial tenants will continue to be protected from eviction until 31 March 2022, whilst the government implements a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic’.

The changes will be brought into force in England by the ‘Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021’ (SI 2021/1029), which comes into force on 29 September 2021 (under Corporate Insolvency and Governance Act 2020, ss 20(1)(a), 25(1)). Regulation 2, the main provision in these Regulations, substitutes into the Corporate Insolvency and Governance Act 2020 a new Schedule 10.

If you have any queries about the insolvency measures, please contact Allison Thompson on 0191 2263719 or in respect to any commercial landlord queries, please contact Aimee Hubbard on 0191 2263792.


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