As foreshadowed by the Draft Corporate Insolvency and Governance Act 2020 (Coronavirus) (Change of Expiry Date) Regulations 2021 the relevant period for temporary reliefs under the Corporate Insolvency and Governance Act 2020 has been extended to 30 June 2021. Most notably, this will mean that the current suspension of personal liability for wrongful trading and the restrictions on use of statutory demands and winding up petitions will remain in place until that date.
Tom Pringle, Partner (Restructuring and Insolvency), commented:
"By 30 June, we will reach the end of our fifth quarter of these restrictions. Debts, particularly rent arrears, continue to build, making the 30 June cliff edge higher than ever. The next three months must be used, by individual companies and the Government, to come up with a strategy to avoid catastrophe."
Mark Barley, Partner (Property Disputes) commented:
"This extension will be of particular relevance to landlords and tenants of commercial properties where rent may be unpaid, as it aligns with the recently extended restrictions on other landlord's remedies for unpaid rent (lease forfeiture and Commercial Rent Arrears Recovery – CRAR)."
Our commentary on the extension of the restrictions on remedies for commercial landlords can be found here but, by way of summary, as matters stand:
- a landlord's right of re-entry to bring a business tenancy to an end on the basis of non-payment of rent (including any other sums payable under the tenancy) is currently suspended until after 30 June 2021;
- the protections in force against the use of CRAR provide:
- if a notice of enforcement is given, or where goods are taken control of, on or before the 23 June 2021, then 457 days' rent must be in arrears
- if a notice of enforcement is given, or where goods are taken control of, on or after 24 June 2021, then 554 day's rent must be in arrears.
The latest insolvency statistics published by the Insolvency Service perhaps paint a rosier picture than the reports on the UK economy would suggest. The number of registered company insolvencies in February 2021 was 686, 49% down on the same period in 2020. There is no doubt that this suppression of insolvency levels is linked to these relief measures.
Many businesses will no doubt be breathing a sigh of relief at this news but the elephant in the room remains how to restructure their COVID-era liabilities. There are no easy solutions but what is certain is that these relief measures cannot continue indefinitely and the underlying liabilities will need to be rationalised. Q2 of 2021 will be a crucial time for UK business. Watch this space.