Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to the Government’s decision to extend its ban on the use of statutory demands and winding-up petitions, which it introduced at the end of April:
“The Chancellor’s decision to temporarily extend his COVID insolvency measures, coupled with the other aspects of the support package announced today, will be welcome news to many businesses across the country.
“The pandemic has hit British businesses in a way that no-one could have imagined or planned for. 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.
“The insolvency and restructuring profession will also welcome the extension of the temporary relaxation of entry requirements for the new moratorium procedure. This measure could enable more businesses to access this important tool over the coming months, and help to facilitate the rescue of otherwise-viable businesses.
“However, 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, well-structured restructuring proposals. They are an important stakeholder in insolvency and restructuring procedures and their support at this time is and will be very significant.
“If management are 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.”