Government extends debt enforcement moratorium as insolvency protections prolonged

By James McAllister

- Last updated on GMT

Government extends debt enforcement moratorium Corporate Insolvency and Governance Act winding-up petitions statutory demands

Related tags: Insolvency, Coronavirus, Government, Legislation

Measures introduced under the Corporate Insolvency and Governance Act, including a restriction on landlords pursuing aggressive forms of rent recovery such as winding-up petitions, have been extended by the Government.

Temporary protections introduced under the legislation had been due to expire on 30 September 2020.

The act, which was first brought before Parliament back in May, is designed to help prevent struggling companies having to file for bankruptcy because of economic problems caused by the Coronavirus crisis.

Following an extension to the commercial eviction ban earlier this month​, the Government has now also extended its debt enforcement moratorium, which restricts aggressive creditor enforcement action, such as statutory demands and winding-up petitions, being used to recoup Coronavirus-related debts until the end of the year.

Companies and other qualifying bodies with obligations to hold annual general meetings will continue to have the flexibility to hold these meetings virtually until 30 December 2020, meaning shareholders can continue to examine company papers and vote on important issues remotely.

Termination clauses are also still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process.

However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary.

The modifications to the new moratorium procedure, meanwhile, which relax the entry requirements to it, will also be extended until 30 March 2021.

A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months.

Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021.

"It is vital that we continue to deliver certainty to businesses through this challenging time, which is why we are now extending these important and necessary measures to protect companies from insolvency," says Business Minister Lord Callanan.

"Through this measure, we want to ensure businesses are able to not only come through this testing period, but also to plan, adapt and build back better."

The original bill also included a temporary suspension of wrongful trading provisions, meaning companies could continue operating without the threat of personal liability to its directors.

While calls have been made for this measure to also be extended, it is unclear form the Government's announcement whether or not it has been.

BigHospitality ​has contacted the Department for Business, Energy & Industrial Strategy for clarification. 

Related topics: Legislation

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