What happened? In response to the pandemic, the Government has introduced a temporary amendment to Company Law. In an effort to maximise the survival of UK businesses, the new bill offers companies a temporary break from company filing and creditor action.
What does it mean for small businesses? For those struggling with payments during this time due to cash flow issues, the new Insolvency Bill could be a lifesaver, providing businesses with extra time to get back on their feet after the lockdown. But for those awaiting payment, it could put a halt on cash flow, increasing the need for alternative forms of financial support, such as the CBILS and BBLS.
The relaxation period expires on 30th June, but due to the extension of accounts filing deadlines, it may take longer than usual for insolvencies to come to light. If you’re concerned about customer insolvency, don’t forget that you can insure individual invoices (or your whole book) with Nimbla from just £5.60.
How might the bill negatively affect my business? The new bill will temporarily prevent the filing of statutory demands and winding up petitions for debts incurred during COVID-19. Under the new temporary legislation, creditors in court proceedings with their debtors may instead have to agree instead to a debtor restructuring plan. Suppliers whose buyers are struggling will also have to apply for permission to terminate their contract.
How can it help me? The bill has been designed to aid businesses affected by the extenuating circumstances of COVID-19 and associated lockdown measures. Of particular benefit to distressed business may be a halt on creditor demands for payments incurred during COVID-19, and a temporary ban on creditors withholding supplies from debtor companies. Directors will not be personally liable for losses while the Bill is in effect, and Companies House filing deadlines are also extended.