UK politics & policy updates
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Restrictions imposed during the coronavirus pandemic preventing businesses serving winding-up petitions against debtors will ease from the end of September, the UK government said on Thursday.
Companies can start using the legal instrument to pursue unpaid bills from next month but only for debts of more than £10,000 compared with the pre-pandemic threshold of £750.
The ban on the use of winding-up petitions to pursue commercial rent arrears, which along with all the measures was due to expire at the end of this month, will remain in place until next March however. The government had already extended a ban on evictions caused by Covid-related arrears to that date.
The £10,000 winding-up order minimum limit — the first increase to the threshold since the Insolvency Act was introduced in 1986 — will also remain in force until March 2022.
“While this increase will only be temporary, it’s a significant one compared to the original sum,” said Christina Fitzgerald, vice-president at insolvency and restructuring trade body R3. “Given the challenges businesses have faced during the pandemic, the new limit is a welcome adjustment.”
As part of the changes creditors must give debtors 21 days to propose a resolution for any unpaid amount. Fitzgerald said this requirement “formalises an approach that we have seen from many creditors since the onset of the pandemic”.
Business minister Lord Martin Callanan said that while “the time is right to lift the insolvency restrictions” some smaller businesses “will need more time to get back on their feet,” adding: “These new measures and protections will help them do that”.
The government said the extension of the rent-arrears ban would allow it to put in place an arbitration scheme to deal with those debts built up during the pandemic.
Helen Dickinson, chief executive of the British Retail Consortium, said the extension “gives businesses some welcome short term certainty” but noted that the government had still not closed the loophole that allowed landlords from using county court judgments to chase tenants for rent.
“While the vast majority of retailers and landlords have agreed rent payment plans, a small minority of landlords are undermining the spirit and intention of the protections and exploiting the CCJ loophole. This must be closed off as a matter of urgency.”
County court judgments cannot be used to compulsorily wind up a company, but they do affect the creditworthiness of a business and its directors and could make access to debt finance more difficult for both.
But Melanie Leech, chief executive of the British Property Federation, said the rent-arrears clemency was being abused by some businesses. “With every day that passes the injustice of fettering property owners’ ability to tackle the abuse of the moratoriums by well-capitalised businesses that can afford to pay rent grows.” She accused the government of continuing to “prejudice the interests of the nation’s pensioners and savers invested in property”.
The changes to the use of winding-up orders come as most of the state support that consumer-facing industries had relied upon during the pandemic tapers away.
The furlough scheme has become progressively less generous and expires altogether at the end of September. For many large retailers the business rates holiday effectively ended in June, while most of the state-backed Covid loan schemes closed at the end of March.