The North East chair of insolvency and restructuring trade body R3 has given a cautious welcome to the Government’s decision to extend its ban on the use of statutory demands and winding-up petitions as part of its coronavirus business support measures.
Alexandra Withers was speaking after Chancellor Rishi Sunak outlined his winter economy plan to Parliament, which includes the continuation of a raft of changes to the law introduced earlier this year to protect struggling businesses from insolvency.
But she has also encouraged the Government to provide a clearer insight as soon as possible into how they expect the land to lie once these temporary measures are eventually removed.
Statutory demands and winding-up petitions will continue to be restricted until the end of 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus-related debts, while businesses struggling to pay their rent due to the impact of Covid-19 remain protected from the threat of eviction until the end of the year.
Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, says: “The Chancellor’s decision to temporarily extend his coronavirus insolvency measures, coupled with the other aspects of the support package announced today, will be welcome news to many businesses across the region.
“These temporary insolvency measures, combined with the furlough scheme and the package of emergency business loans, have played an important role in preventing financial pressure from translating into increased corporate insolvency levels of the size and scale we would expect to see in this type of economic climate.
“While the Chancellor’s announcement will make a real difference in the coming months, these measures can’t be prolonged indefinitely, and the Government will face a number of questions when this extension ends.
“What will the Government’s approach be to the mounting level of corporate debt in the economy? What further flexibility will HMRC provide to COVID-hit businesses which need extra time to pay their debts? The Government needs to make the most of the time it has bought for business, industry and the economy with today’s announcement to consider how it will answer these questions.
“We would welcome HMRC adopting a constructive approach to sensible, pragmatic restructuring proposals. HMRC is an important stakeholder in insolvency and restructuring procedures and its support at this time is and will be very significant.
“If North East business owners and managers are at all concerned about their options, they should not be embarrassed about taking advice from an R3 member, most of whom will provide an initial consultation for free.”