Struggling businesses have been handed additional assistance after the Government extended changes to insolvency laws that were brought in during the pandemic.
In response to the coronavirus pandemic and the resulting lockdown measures, the Government introduced the Corporate Insolvency and Governance (CIG) Act to bring in new tools to give struggling firms “the time they need to maximise their chance of survival”.
The Act introduced easements for Annual General Meetings and filing requirements for public limited companies but also brought in a number of measures that stopped creditors and suppliers from pressuring businesses.
- Preventing suppliers from ceasing to supply goods or asking for additional payments while a company was going through a rescue plan.
Removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency.
Prohibiting creditors from filing demands and winding-up petitions for Covid-19 related debts.
Prohibiting termination clauses that start when a company enters insolvency, entering the new moratorium or beginning the new restructuring plan procedure.
The CIG is a temporary measure and was originally due to come to an end on March 31 but it has now been extended until the end of June.
The extension has been welcomed by insolvency specialists, including trade association R3’s North East chair Alexandra Withers. She urged businesses to use the extension to plan for the future.
Ms Withers, who is also an associate solicitor at Short Richardson & Forth Solicitors in Newcastle, said: “The measures contained in the Act have added to the options available to insolvency and restructuring professionals whose role in rescuing businesses and supporting long-term corporate survival is now more crucial than ever before.
“The Government’s decision to extend them 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 both these measures and other 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 state 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 current or expected future business finances to seek professional advice.
“Doing so now rather than waiting 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.”