With the ending of the furlough scheme in September 2021, following the easing off of government support since July, it is a sad fact that many businesses will be facing the harsh reality that they are unable to continue to trade in their current form.
To compound matters for struggling companies, the protection against winding up petitions has now largely ended. Whilst this may be good news for creditors owed large sums of money from their corporate debtors, there are still some increased protections in place.
Under new temporary measures introduced on 1 October 2021, until 31 March 2022, a creditor still cannot present a winding up petition against a company if either of the following apply:
- The unpaid debt must be in excess of £10,000. In the days before COVID, a creditor could present a winding-up petition against a company if they were owed just £750 or more.
- Cases where a landlord is owed rent by its commercial tenant. This is not entirely surprising given the existing COVID protection from landlords being able to forfeit (end) commercial leases as a result of rental arrears until 31 March 2022.
However, even if your company is not saved by one of the above criteria, creditors must seek proposals for payment from the debtor company, giving 21 days for a response, before they can proceed with winding up action. In reality, many creditors will often give debtors ample opportunity to make such proposals before engaging solicitors, let alone issuing proceedings, but at least this additional step will help focus minds and hopefully avoid court.
Whether struggling to gather in amounts owed by your clients and customers, or simply struggling to keep the business afloat following a long period of inactivity or closure, it is always better to deal with the prospect of insolvency proactively.
If you are a company director struggling to navigate your legal obligations and duties at this challenging time, or you have substantial monies owed to you by a debtor, then obtaining sound commercial advice can be priceless. Our experienced business solicitors can provide you with strategic advice, guidance on compliance with your directors’ duties when faced with insolvency (or insolvent clients) and work with you on debt recovery or restructuring plans to rescue your business so it can move forward. If the business cannot be rescued, we can advise on the insolvency process and help implement any formal process. Call 01590 676933 or email [email protected] to speak to an expert in company law, restructuring and insolvency to get things moving.