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HomeSector InsightsDispute ResolutionTemporary debt recovery restrictions end today

Temporary debt recovery restrictions end today

Temporary debt recovery restrictions brought in last September to protect businesses affected by the Coronavirus pandemic end today.

The Corporate Insolvency and Governance Act 2020 introduced temporary measures which were designed to protect viable businesses from being forced into insolvency due to trading restrictions caused by the coronavirus pandemic.

Restrictions relaxed the pressure on companies with debts under £10,000 and commercial rent arrears. They also demanded creditors to wait an extra 21 days before issuing a winding-up petition for debts over £10,000.

From tomorrow, creditors will once again choose how to pursue unpaid debts, removing uncertainty over a temporary requirement for a 21-day notice period to be served before issuing a winding-up petition.

Those businesses still struggling financially post-covid, are now at risk of creditors looking to pursue indebtedness.

In September, the government announced that the previously imposed restrictions on statutory demands and winding-up petitions – which were due to expire on 30 September 2021 – would not be extended but would instead be replaced with more limited restrictions for winding-up petitions presented between 1 October 2021 and 31 March 2022.

Once the moratorium lifts today, there could be an influx of debt claims and/or compulsory winding up orders being issued against debtors in respect of non-payment of undisputed debts. In turn, this potentially could lead to increasing numbers of insolvent companies.

Creditors should be assessing how they intend to pursue debt going forward by predicting where potential problems could be.

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