COVID-19 in the UK – certain temporary insolvency measures extended again
On 16 June 2021, the UK government announced that:
- The restrictions on statutory demands and winding up petitions for COVID-19 related debts will be extended for a further three months until 30 September 2021.
- The prohibition on commercial landlords forfeiting leases for non-payment of rent and on the use of commercial rent arrears recovery will be extended for a further nine months to 25 March 2022.
- New legislation will be introduced to ringfence outstanding unpaid rent that has built up when a business has had to remain closed during the pandemic. The legislation will help tenants and landlords work together to come to an agreement on the terms of a repayment plan. Where an agreement cannot be made, the legislation will introduce a binding arbitration process to enable both parties to come to a legally binding agreement.
What businesses do the extensions apply to?
The extensions apply to all businesses, but the new legislative measures will only cover those impacted by closures. This means that rent debt accumulated before March 2020 and after the date when the trading restrictions on a particular business were lifted, will be actionable by landlords as soon as the tenant protection measures are lifted (from 1 October 2021 for winding up petitions and from 26 March 2022 for forfeiture).
Certain insolvency measures have not been extended:
- the relaxation of directors' liability for wrongful trading (for any worsening of a company's financial position in the relevant period) will end on 30 June 2021
- the small suppliers' exemption from the requirement to continue to supply a business in insolvency will end on 30 June 2021
- the relaxation of some of the requirements for entering into the new moratorium procedure will end on 30 September 2021.
The government hopes these measures "…strike the right balance between protecting landlords while also helping businesses most in need" and is keen to make clear that businesses who are able to pay rent must do so.
Different stakeholders will have different views on whether the right balance has been achieved. It remains to be seen whether the desired consensual agreements between landlords and tenants will be facilitated or whether the extensions will encourage unviable businesses to continue to accumulate unpaid rent (and other debt) and avoid an insolvency or restructuring process.
