Since June last year, countless companies have been seeking out financial support as they started to navigate the harsh reality of the Covid-19 Pandemic. Given the uncertainty around the economy and how this would impact their prospects during such unprecedented times, creditor action has been put on hold due to the Corporate and Governance Act 2020.
One of the main reasons for this act was to prevent insolvency procedures taking effect on companies which found trade immensely difficult during what has been a rather trying period. But, now that protection is to be eased, this also means creditors can now act just as they would have done before the Pandemic started to really take effect.
However, more breathing space will be given to small-scale businesses, something which will help them find appropriate solutions before drastic action is taken by creditors. This will be especially beneficial to industries which have been the hardest hit, such as leisure, retail and hospitality. Much longer timelines will be applicable to any companies which operate within these sectors, giving them the best possible chance to take more control over their finances.
Brand new legislation is to be introduced, protecting businesses from creditors who are seeking the repayment of small debts, where the threshold for winding up petitions will be £10,000 plus. Creditors looking to take action will be required to seek proposals for payment from a debtor business. They will then have 21 days for a response, and only if the response is not satisfactory can the creditors petition to court to have the company wound up.
These new measures are to be introduced through a Statutory Instrument, covering England, Scotland and Wales. On the other hand, Northern Ireland won’t follow the exact same framework, but will be implementing similar legislation.
Are you worried about these changes and how this might affect your business? You are certainly not alone! And in most cases, taking the necessary action early can give you a much better chance of moving forward positively. So get in contact with RG Insolvency today, and we can offer impartial advice from fully licensed insolvency practitioners for these changes, as well as common insolvency procedures such as administration and compulsory liquidation.