The Corporate Insolvency and Governance Act 2020 (CIGA) introduced a number of temporary measures to help protect companies affected by the lockdown restrictions during the pandemic.
The measures included the relaxation of wrongful trading, restrictions on winding up companies, and easements for entry into the new company moratorium. These measures expired at the end of June 2021, except for the restrictions on winding up companies, which Ministers have decided will be gradually removed from 30 September 2021.
The CIGA provisions have protected companies in financial distress as a result of the pandemic from creditor action since June last year, by ensuring that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily. 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. This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.
The new legislation will:
- Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more.
- 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 31 March 2022.