Contributors
Jonathan Dunkley, managing associate, provides his opinion on the business support package from a restructuring and insolvency perspective.
"The business support package in the Budget has a clear focus on minimising corporate insolvencies. Insolvencies have for the majority of 2020 and so far into 2021, remained at record low levels when compared with those in previous years, notwithstanding the impact of COVID-19. This is largely due to the Government support measures put in place throughout last year. The Government support set out in the Budget which includes the extension of the Coronavirus Job Retention Scheme to September 2021, business rates relief for eligible retail, hospitality and leisure properties (100% between 1 April and 30 June 2021 and 66% between 1 July and 31 March 2021) together with the introduction the new Recovery Loan Scheme (a new form of 80% Government backed support loan on eligible loans of between £25k to £10m) and Restart Grants (up to £18k per premises for hospitality, accommodation leisure and personal care), may well have the desired effect of keeping the level of insolvencies low. There is of course a key distinction between insolvency suppression, which may yet end in businesses failing, and prevention which will enable businesses to restructure and trade out of the pandemic.
"The elephant in the room remains that a number of businesses are carrying significant amounts of debt having relied upon relief measures such as VAT deferrals and business support loans and have in a significant number of cases not paid rent since the 2020 March quarter. The support measures in the Budget will likely, therefore, need to be bolstered with further legislative intervention in the form of the extension of enforcement relief measures introduced in the Coronavirus Act 2020 and the Corporate Insolvency and Governance Act 2020 ("CIGA"). There has already been an indication in this regard in relation to CIGA in the form of the Draft Corporate Insolvency and Governance Act 2020 (Coronavirus) (Change of Expiry of Date) Regulations 2021 which will extend the Secretary of State's temporary powers to amend the provisions of CIGA until 29 April 2022. This power would include, for example, the ability to extend the current restrictions on the presentation of winding up petitions which are currently due to expire on 31 March 2021.
"Now that we have a route map for businesses to reopen and trade out of the pandemic, it is encouraging to see that that the Government has heeded the warning that a sharp withdrawal of support measures could lead to a spike in insolvencies. The challenge and the focus going forwards should be for businesses to assess how best to restructure their COVID-era liabilities and ensure their survival until the economy can recover."
