To help businesses with the ongoing impact of the pandemic the Government has decided to extend measures in the Corporate Insolvency and Governance Act (the Act) to protect struggling companies.
The extension to the measures introduced in the Act, includes an extension of the suspension of liability for wrongful trading from 30 April 2021 to 30 June 2021, as well as respite for those facing winding up petitions during the same period.
Struggling businesses and their owners will welcome the extension to the continued reduction in the threat of personal liability arising from wrongful trading. Whilst not a licence to act irresponsibly it does recognise that whilst none of us can predict the future at the best of times that is even harder in the current climate. Directors should note though that other protections remain in place and therefore consideration should still be given to transactions at an undervalue and preferences which may take place in this period.
The Act also reduces some of the restriction to the use of the new Moratorium scheme which gives companies the breathing space to formulate and present a rescue plan when facing cashflow difficulties.
Statutory demands and winding up petitions also continue to be restricted although this restriction does not apply where the applicant can show that COVID is not a factor and therefore should not be seen as an out-right ban.
In response to the extension, R3, the insolvency and restructuring trade body, is calling on directors of COVID-hit businesses to make the most of the time granted by the Government’s extension to restructure and rebuild.
It says that business owners should use this additional time to put plans in place for when the Government support ends with the help of a professional adviser, such as their accountant, to consider the options open to them to address their financial issues.
Simon Rowe, Partner at Milsted Langdon commented: “Insolvencies have been at a record low over the last 12 months, but as Government support is slowly being pulled back alongside businesses having to plan to reopen, many are finding there’s no working capital left. Although this extension is welcomed, it will not stop insolvencies, and company directors need to carefully consider their position if they have any concerns.”
For more information on how we can help you with insolvency and business recovery, please contact our experienced insolvency team today.