Insolvency figures released for August 2021 by the Government’s Insolvency Service show a 71% increase in corporate insolvencies compared to the same month last year (1348 in August 2021 and 788 in August 2020). Insolvencies are also similar to the number registered two years previously (pre-pandemic; 1,336 in August 2019).
Tough times ahead as corporate insolvencies forecast to rise
Leading restructuring and insolvency professional, Oliver Collinge from PKF GM said: “The surge in corporate insolvency numbers is not surprising. We expect the numbers to continue to rise as furlough comes to an end this month, which will likely cause a substantial increase in creditors taking recovery action.
Restrictions on the presentation of Winding Up Petitions under the Corporate Insolvency & Governance Act 2020 are due to end with the introduction of new measures announced by the Government
Good News – for the most part (unless you are a commercial landlord seeking rent arrears), the restrictions under Schedule 10 of the Corporate Insolvency & Governance Act 2020 (CIGA 2020) relating to winding up petitions are finally due to cease on 30 September 2021!
Whilst it is not yet entirely clear, it is therefore anticipated that both the requirement to satisfy the ‘Coronavirus Test’ and the non-attendance pre-trial review will fall away.
Changes announced on 9 September, to assist a transition back to normality, the Government have announced that new temporary legislation will be brought in (yet to be confirmed but anticipated to end on 31 March 2022) as follows:
1) The minimum debt threshold allowing a creditor to present a winding up petition will increase from £750.00 to £10,000.00. This has been the first increase in the winding-up order minimum limit since 1986 and is aimed to enable smaller businesses the opportunity to recover following the pandemic before creditors are able to take action to wind them up.
2) There is a compulsory requirement that, prior to presenting a winding up petition, a creditor is required to give any debtor 21 days to seek to agree proposals for payment of the debt. This will mean that creditors will not be able to reply upon a 48-hour demand letter as evidence of a debtor company’s insolvency if and until the restrictions are lifted.
These new measures will be introduced in statute to cover England, Wales and Scotland. Once published, the legislation will hopefully further clarify exactly what is expected of both creditors and debtors during the period that it proposed to cover and we will provide further comment as to its impact once the new legislation has been released so watch this space…
Source: Francis Wilks Jones, Solicitors, CCR Magazine, PKF GM.