Rik Heap from Leonard Curtis Business Solutions Group on how not to get caught out
Some of the temporary measures introduced by the government to help protect struggling businesses during the pandemic – including the restrictions on the use of statutory demands and the presentation of winding up petitions – are coming to an end on 30th September 2021.
Creditors will once again be able to enforce a debt using these powerful tools.
A number of Government-led limitations should help smaller companies in the medium term. These include restrictions on commercial landlords which does not allow them to present winding up petitions against companies in respect of commercial rent arrears built up during the pandemic. These rules will be in place until 31st March 2022.
In addition, targeted restrictions will come into force on 1st October 2021 to protect businesses from winding up in respect of liabilities, other than commercial rent. The announcement states that legislation will be introduced to:
- Protect businesses from creditors insisting on repayment of relatively small debts, by temporarily raising the current debt threshold for a winding up petition from the previous level of £750 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
It is clear that any business owing a supplier over £10,000 – and according to the legislation, several creditors can act together to get over the threshold – is at risk of creditor action if they do not do something about it.
We would always recommend taking action early and that it is important to work with creditors if a consensual solution is to be found.
Many business owners have buried their head in the sand over the last 18 months, because there has been little that creditors could do to hurt them.
However, creditors can no longer be ignored and, while there is a general feeling among some commentators that the Courts may take a lenient view – perhaps allowing adjournments after such a difficult period – it won’t be forever and businesses that do nothing risk some very serious consequences.
Click here for the thoughts of legal expert Andrew Gregory, Head of Leonard Curtis Legal, where he discusses some of the key issues from a legal perspective and provides some advice on what business owners should consider in respect of winding up petitions.
With the furlough scheme also due to end on 30th September – which will put further strain on the cash flows of many businesses – SMEs are putting themselves at greater risk of action from creditors unless they are proactive.
If any of your clients find themselves under pressure due to debts owed, please encourage them to to take advice in this area so that they can retain control of their business.