News |Insolvency

14th September 2021

Temporary insolvency measures to end announces The Insolvency Service

Covid-related restrictions to be phased out from 1st October.

The Insolvency Service has signalled the end of temporary insolvency restrictions in England, Scotland and Wales from Friday 1st October 2021. (Northern Ireland will follow with “similar legislation”). However, some protections for businesses facing insolvency will remain until at least 31st March 2022, with new “targeted measures to support small business and commercial tenants” due to be introduced from next month.

Business Minister Lord Callanan believes “the time is right to lift the insolvency restrictions that were needed during the pandemic”, as “we are seeing life and the economy returning to normal with a strong rebound”.

What are the new insolvency restrictions?

Under the new legislation, winding up petitions will only be issued for debts of £10,000 or more – a significant increase on the £750 debt threshold pre-pandemic. However, this higher figure may be deceiving, as the £10,000 threshold doesn’t need to apply to a single debt, but can be the sum of multiple debts owed to 1 creditor or of debts owed to a group of creditors.

The second measure to be introduced will give debtor businesses 21 days to submit a payment proposal to creditors before the creditors can take winding up action.

In addition, the 16th June announcement that commercial tenants will be protected from eviction until the end of March next year is being upheld. The Insolvency Service notes that “businesses should pay contractual rents where they are able to do so.” The extended protection is designed to stop commercial landlords from liquidation of limited companies to repay “arrears built up during the pandemic”.

The Insolvency Service expects these new measures “will particularly benefit high streets, and the hospitality and leisure sectors”.

Which insolvency restrictions are ending?

The measures which are ending include the suspension of serving statutory demands and wider-ranging restrictions on winding up petitions. The suspension of the wrongful trading rules, which temporarily removed the threat of personal liability from directors for wrongful trading, was lifted at the start of July 2021. All 3 of these temporary measures were put in place in June 2020, with the restrictions on statutory demands and winding up petitions applying to the period 1st March 2020 to 30th September 2021, as part of the Corporate Insolvency and Governance Act 2020.

The Act introduced some permanent measures, too, which will remain in place beyond the end of the month. These permanent measures centred on rescue and restructuring plans, and were in development before the Covid-19 pandemic.

What will be the impact of the changes?

On balance, October’s changes appear to benefit creditors, while affording some level of continued protection to the most vulnerable debtors – SMEs, high street business and those in the hospitality sector. How strong those protections are in practice remains to be seen, however, as the new £10,000 debt threshold for winding up petitions may not be high enough if creditors decide to group together to take action.

Instruct ESA Risk today

If you’re looking for an experienced company to reliably serve documents, look no further than ESA Risk. Our extensive network of process servers covers the whole of the UK (as well as overseas locations).

Whether you require us to serve relatively straightforward, standard documents or to organise complex time-synchronised, multi-location services, either in the UK or overseas, we’ll work with you to understand your specific requirements and tailor our services and fees accordingly.

Need to confirm an address before sending documents? We also provide tracing services, ensuring you serve the right people in the right place at the right time.

Email us at process.serving@esarisk.com, or call us on +44 (0)843 515 8686.

contact us online or by phone

Get the advice you need

Our expert consultants are on hand to give you the support you need.

What are you looking for?

Get the advice you need

Deep dive for the answers you need
Or contact us on +44 (0)843 515 8686 or at advice@esarisk.com.

Deep dive for the
answers you need

Lawyers, accountants, advisors, investors, senior
management. You name them, we help them find the answers
they need. Ready to discover how we can help you?