The coronavirus lockdown has put significant financial pressure on companies up and down the country. Government social distancing restrictions mean that many sectors have been forced to shut down altogether. This, in turn, is affecting their ability to service their debts and could cause cashflow issues for their creditors. In order to support businesses and help them to survive during the COVID-19 pandemic, restrictions on certain elements of the debt collection industry have been introduced.
Ban on statutory demands and winding-up petitions
There will be a temporary ban on the use of statutory demands and winding-up petitions. Statutory demands made between 1st March and 30th June 2020 and winding up petitions presented from 27th April to 30th June 2020 will no longer be allowed where the problems are due to coronavirus. This is to provide breathing space for companies who have suffered considerable financial strain because of the coronavirus restrictions.
These new measures will be included in the Corporate Insolvency and Governance Bill set out earlier in the month by Business Secretary Alok Sharma. Any winding-up petition will first have to go before the court to determine why the company is unable to pay its debts. Where it is found that this is due to the coronavirus problems the petition will not be allowed to proceed.
The new rules are in place until 30th June 2020, but can be extended by the government if necessary.
Support for commercial tenants
The ban on statutory demands and winding up petitions has been implemented to support businesses through this difficult financial period. Those with business premises who are struggling to pay their monthly or quarterly rent will also benefit from changes to the Commercial Rent Arrears Recovery (CRAR) process. The government is implementing changes to the system which will mean it can only be started once a tenant owes their landlord at least 90 days in rent.
There is also a moratorium on forfeiture of commercial leases until at least 30th June 2020. You can find out more details on COVID-19 support for commercial landlords and tenants here.
More information
Check eligibility for government coronavirus financial support for businesses
10 ways to help your business financially during the coronavirus pandemic