Winding Up Restrictions are no more…

One of the Pandemic related reprieves for struggling businesses was the repeated extension by Government of the restrictions on serving winding up petitions. That came to an end on the 30th September, leaving those businesses at risk of being served such petitions by creditors.

All is not quite as gloomy as it may appear, as temporary insolvency measures have been introduced. Under these temporary measures, the debt threshold for winding up petitions is being increased from £750 to £10,000, and will require creditors to request payment proposals from debtor businesses. This allows 21 days for a response before a winding up order can be made. These temporary measures remain in place until 31st March 2022.

1. If you owe funds to a creditor in excess of £10,000, NOW is the time to ensure that you obtain professional advice around the situation. There are ways to improve your position, but trying to do that within a 21 day window for response is too late. We know insolvency probationers who will be happy to speak to business owners who are in this position, and who have helped clients in the past.
2. Similarly, if you are owed in excess of £10,000 NOW is the time to pursue that cash for your business. Get in touch if you would like to discuss how best to proceed.

The Corporate Insolvency and Governance Act 2020 (CIGA) was the legal framework which included the moratorium, and it appears that it was successful in keeping businesses afloat during the worst of the pandemic. The latest figures from the Insolvency Service show that overall numbers of company and individual insolvencies have remained low, when compared with pre-pandemic levels.

While creditors voluntary liquidation (CVL) numbers have now returned to pre-pandemic levels (in August 2021 there were 1,256 CVLs, which is the highest level seen since January 2019), the statistics for other insolvency procedures, such as compulsory liquidations for companies and bankruptcies for individuals, remain lower.

We are very likely to see a flood of petitions hitting the courts, and a rise in insolvency rates is likely to follow. Just as we saw a pent-up demand for products and services as we emerged from lock-down, there is likely to be a surge of demand for the legal recourse that has protected many businesses over recent months.

HMRC’s stance on debt recovery is yet to be seen, but since 1st December 2020, debts for ‘key crown liabilities’ (PAYE, NIC and VAT) rank ahead of charge secured debt and unsecured trade and supply creditors. HMRC has stated that it will “collect the tax due in a way that recognises the very real needs and challenges that businesses and individuals face”, adding that it is “mindful that some customers will remain in uncertain financial circumstances for a period of time, and we are ready to provide them with support”.

What this stance means in practice is in doubt. What is clear though is that struggling businesses can no longer ignore debts that have built up since March 2020, and must address them quickly, or risk having a solution enforced upon them by creditors, whether HMRC or otherwise.

If you owe creditors, as mentioned above, now is not the time to ignore them and hope they go away.

It won’t happen. 

Now is the time to take action to safeguard your future. Speak to us, speak to an insolvency practitioner, your bank, other lenders… You have options. but they will reduce drastically as the months move on. To retain any semblance of control you need to face the problem head on. If you’d like to make the first step a conversation with us, please get in touch. We don’t judge at all, we’re simply here to help.