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The end of September bought about many changes to the UK Government COVID assistance schemes, which have been in effect since the beginning of the pandemic.

The end of temporary insolvency measures is a big one for many UK businesses, as many have struggled given the economic drawback and uncertainty that has existed due to lockdowns and restrictions in trading.

Through the Corporate Insolvency and Governance Act 2020, the temporary insolvency measures aimed to protect companies that entered into financial trouble during the pandemic from creditor actions that would ultimately see them shutting up shop.

And so now, as lockdowns are no more and restrictions have been eased, the government has phased out this COVID-induced insolvency protection and introduced another new, temporary legislation through a Statutory Instrument.

“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,” commented Business Minister, Lord Martin Callanan.

The new legislation covers businesses in England, Wales and Scotland, with Northern Ireland set to introduce another, similar one. It will be in effect until 31 March, 2022 and aims to:
  • Protect businesses from having to repay creditors on “relatively small debts”, setting the current debt threshold to £10,000 or more before a winding-up petition can be initiated
  • Protect businesses by making it compulsory for creditors to seek a proposal for payment from a debtor business and allowing the debtor business 21 days to respond before the creditor can continue with the winding-up action
But with the winter months looming and action-plan options of A and B set out by the government, only time will tell how the UK business economy gets through the next 6 to 9 months and whether these new protection measures are protection enough.

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