Temporary Insolvency Measures - an update

October 8, 2021

The Corporate Insolvency and Governance Act 2020 (“CIGA”) was implemented on 25 June 2020 and brought a number of temporary changes to the legislation in response to concerns arising from the pandemic.

The temporary restrictions, originally introduced for a three month period, and which were extended on several subsequent occasions, have now been withdrawn and replaced by new, targeted measures.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10 Regulations) 2021 (“the Regulations”) are effective from 1 October 2021 and are designed to help small companies and commercial tenants.

 

Winding up petitions

There are no longer any restrictions on issuing statutory demands although, from 1 October until 31 March 2022, the threshold for submitting a winding up petition has been increased from £750 to £10,000 or more. 

A creditor must now seek repayment proposals from a debtor business in writing, with those businesses given twenty-one days to respond before a winding up petition can be presented.

A creditor can apply to the Court for permission not to write to a debtor business or to give less than twenty-one days to put forward repayment proposals.

 

Commercial tenants

In England and Wales commercial landlords are currently prevented from forfeiting leases due to the non-payment of rent and are restricted from exercising Commercial Rent Arrears Recovery until 31 March 2022, whilst the government implements a rent arbitration scheme to deal with commercial rent arrears that have built up during the pandemic.

It would be pointless, whilst landlords are prevented from forfeiting a lease, if they could still proceed to issue a winding up petition against the tenant.  Recognising this, the Regulations provide that a winding up petition may not be presented if the debt is in respect of rent or any other amount the tenant is liable to pay under the terms of the commercial tenancy agreement and which is unpaid as a result of a financial effect caused by the pandemic.