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Temporary insolvency measures will be phased out

Temporary measures introduced to support businesses from insolvency during the pandemic will be phased out from October 1.

Companies in financial distress as a result of the pandemic have been protected from creditor action since June last year, through the Corporate Insolvency and Governance Act 2020.

This was to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily.

The government said: “As the economy returns to normal trading conditions, the restrictions on creditor actions will be lifted.

“New measures will be brought in to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up.

“This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.”

The new legislation will temporarily raise the current debt threshold for a winding-up petition to £10,000 or more.

It will also require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding-up action.

These measures will be in force until March 31, 2022.

Business minister Lord Callanan said: “The success of our vaccine rollout means we are seeing life and the economy returning to normal with a strong rebound, and the time is right to lift the insolvency restrictions that were needed during the pandemic.

“At the same time, we know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures protections will help them to do that.”

Picture by Wirestock Creators/Shutterstock

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