What is available to stop creditors taking action against the company to recover debts during the current crisis?
The government has announced a number of measures to try to protect businesses during the current period of uncertainty. However there is no outright ban on creditors being able to take legal action to recover money they are owed, though there are temporary restrictions on some forms of legal action, like winding up petitions.
However, it is important to note that these measures only relate to winding up proceedings. Creditors will still be free to commence county court claims.
The new Corporate Insolvency and Governance Act 2020 brings in a new “moratorium” procedure. Businesses in financial difficulty that are viable and can be rescued will now be able to work with an insolvency practitioner to obtain at least 20 business days’ breathing space from creditors to allow the business to formulate a plan to deal with its financial problems.
For more information on the Corporate Insolvency and Governance Act, click here
As part of the raft of measures put forward by the government over recent months, there are also restrictions on landlords taking action to evict commercial tenants who miss rent payments. Various payment holidays and forbearance have been put in place in respect of certain tax liabilities and some business rates.
If your business is going to go into an insolvency process like administration or a company voluntary arrangement, there is the ability to obtain a freeze on creditors taking action whilst those procedures are put in place. However, these sorts of moratoriums will not be available to everyone and in any event not unless an insolvency process is being instigated.
Regardless of whether a business has formal protection from creditors or not, engagement with creditors and trying to reach agreement with them to deal with the debt is therefore vital. Much of the protection measures that the Government has introduced like curbing the ability of landlords to evict a commercial tenant, do not wipe out the debt. They simply prevent action being taken or a payment becoming due for a short time. All businesses should use that time to consider how those debts can be dealt with and engage with the relevant stakeholders sooner rather than later.
Related FAQs
Hopefully, further guidance will provide additional clarification on this, but it is difficult to see how a charity whose operations have been significantly curtailed because of the Covid-19 restrictions, cannot furlough employees and access the scheme, in particular where they have several different income streams. For example if a charity’s retail or fundraising operations have been significantly curtailed due to the restrictions, then it would appear unfair for it not to able to rely on the furlough scheme to assist in the funding of the employment costs associated with this part of the charity.
However, it might be prudent, where there are services that are publicly funded and employees working within those services cannot undertake their normal work, to consider if they can do different roles to work on Covid-19 activities. If there is no such work available then the guidance does appear to allow the furloughing of employees and such organisations to access the scheme.
In our experience, the funding streams and work undertaken by the organisations that could fall into the third category identified above can be exceptionally diverse and we would strongly recommend that you take advice before making such decisions about furloughing employees.
Read more about thisThe Construction Leadership Council (with backing from the Government) has issued practical guidance and draft pro-forma documents to enable all parties involved in the construction supply chain to enter into collaborative and open dialogue about applications for extensions of time and additional payment and to minimise potential disputes. The guidance can we downloaded here
The draft letters and notices included in the guidance have been prepared on the basis of the standard JCT Design and Build 2016 and NEC 3/4 Engineering and Construction Contract (Option A) and parties will need to make sure that they are completed/adjusted to comply with their own specific contracts.
The Cabinet Office has also issued a general statement calling on parties to contracts adversely affected by C-19 to act responsibly and fairly and to support national efforts to protect jobs and the economy.
Read more about thisYes. The system for Probate Applications has moved on-line and continues to be available as well as by post. However, if you need to complete an Inheritance Tax Return IHT400 you are likely to experience problems collating information due to delays in many organisations being able to provide you with current values while their offices are closed and staff working remotely. Property valuations will be particularly problematic where surveyors or valuers are unable to attend properties to undertake non-urgent work. If you cannot wait, you must use your best endeavours to be as accurate as possible as regards the information you provide in the IHT400 and follow up by providing HMRC with actual values as soon as you can do so. HM Courts and Tribunal Service is however warning that delays can be expected at this time.
Read more about thisLenders implementing the Scheme can assist in a number of ways, including:
- Term loans
- Overdrafts
- Invoice finance
- Asset finance facilities
The maximum value available under the scheme is £5m, with repayment terms of up to six years for term loans and asset finance. Overdrafts and invoice finance facilities will be available for up to three years.
Read more about thisSpecialist healthcare lawyers from Ward Hadaway ran a free webinar looking at the practical and legal considerations if required to treat healthcare workers from a BAME background or other vulnerable groups differently in the fight against the Covid-19 pandemic.
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