The Government further extends emergency legislation to protect businesses until the 30 June 2021

In an announcement on 25 March 2021, the Government further extended the temporary suspension of insolvency and other measures which are aimed at protecting businesses during the coronavirus pandemic.

The original measures introduced in 2020 saw an extension to the 31 March 2021 and now, we see a further extension to the 30 June 2021.

The measures that have been extended include:

  • statutory demands served between 1 March 2020 and 30 June 2021 may not be used to form the basis of a winding up petition;
  • winding up petitions cannot be presented between 27 April 2020 and 30 June 2021, unless it can be established that the insolvency is unrelated to the coronavirus pandemic; and
  • the moratorium preventing forfeiture of commercial leases due to the non-payment of rent has also been extended until 30 June 2021.

The measures which the Government have taken, aim to protect debtor companies against creditor action during a period when companies are continuing to be impacted financially by coronavirus.

By way of example,  this means creditors cannot rely on statutory demands to bring winding-up petitions and are prohibited from filing winding up petitions where the company’s inability to pay its debts is due to coronavirus.

This does not in itself prohibit the presentation of a winding up petition, but the petition will need to the reviewed by the Court and if the Court is satisfied that the inability of the business to pay the creditor relates to coronavirus, then the petition will be void.

A further breathing space is provided to business tenants by the extension of the moratorium preventing landlords from forfeiting commercial leases based on rent arrears which will last until 30 June 2021. The moratorium over forfeiture was due to expire on 31 March however this is also now further extended. The Government hoped that this additional time would allow tenants the opportunity to reach arrangements with their landlords over rents which would then enable businesses to continue to operate. Many landlords now find themselves with fewer options at their disposal to force payment of rents whilst this moratorium remains in place.

These latest extensions are in keeping with the other temporary measures which were extended last Autumn, including a relaxation of the personal liability that may be imposed upon directors for wrongful trading.  Whilst taking all these steps, the Government hopes to help viable businesses continue to operate through the pandemic, it raises some important questions around whether this is the ‘final extension’ and whether this is protecting good businesses or just delaying the inevitable collapse of some businesses who may be sleepwalking into financial ruin.

While it is currently speculation, the issue must be whether, on the eventual final extension of the moratorium, Government will be forced to introduce additional forms of protection by way of statute in order to lessen the impact on debtors and to prevent multiple insolvencies and business collapse, for example, requiring rather than, as at present, urging creditors to agree repayment instalments.

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

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