Home / The Rix & Kay Blog / Further extension to Insolvency measures – announced by Alok Sharma, Secretary of State for Business, Energy and Industrial Strategy
Richard Ludlow

Partner - West Kent (Hadlow)

18th December 2020

The government announced last week – as part of an update that included extensions to the moratorium of commercial businesses being protected from eviction – that the temporary restrictions on the issuing of both statutory demands and winding up petitions was to be further extended from 31 December 2020 to 31 March 2021.

This is a further extension to the insolvency restrictions in an attempt to assist the business community as we continue to be affected by Covid19. The restrictions were first bought in from March 1, 2020 in respect of statutory demand and April 27, 2020 for winding up petition.

When considered in tandem with other government Covid19 support measures which have been put in place for the protection of the economy as a whole, these insolvency measures are causing a very substantial impact on the levels of insolvency we would normally see. The numbers, from the Insolvency Service, demonstrate that company insolvencies in England and Wales for April to September 2020 are currently down by around 33% on a year on year basis. When you look at this figure – it is worth noting – that as we go through a recession you would normally expect to see an increase in corporate insolvencies not a decrease.

It would appear likely, based on the evidence that we have from the last 2 quarters, that until the measures end we can expect corporate insolvencies to remain artificially low. This, as we all know, will leave a larger and larger number of companies that will exist – in zombie mode – but that which will not be viable without the current ongoing support. This will ultimately lead to a position that when the economy starts to improve and the government begins to phase out the protection that these measures – and others – give to the business community as a whole then we will see, in all likelihood, a huge and prolonged increase in the number of companies that fail, falling into  with all the associated problems that this will bring.

Contact our Insolvency lawyers in West Kent (Hadlow), Ashford, Uckfield and Brighton & Hove

For further advice on the insolvency measures please see our previous blogs. If you wish to seek advice on your company, your position as a director and how we can assist you in protecting both yourself and your company as well as to safeguard its future please contact Richard Ludlow in our insolvency and restructuring team to discuss how we can assist you and your business. e richardludlow@rixandkay.co.uk t. 01732 441695