We’ve been keeping our social media pages up to date recently with the various changes and updates to government support schemes that have been coming into effect. With this in mind, we’ve broken down the recent changes to the temporary insolvency measures that were put in place, the Bounce Back Loan scheme and the Coronavirus Job Retention Scheme in more detail.
What were the temporary insolvency measures that were put in place during the Corona Virus pandemic?
These were measures that were put in place to protect businesses from insolvency during the pandemic under the Corporate Insolvency and Governance Act 2020. Designed to protect viable businesses, it made sure that they weren’t forced into insolvency unnecessarily as a result of lockdown. It protected these businesses from creditor action.
Now the economy is beginning to return to normal trading conditions however, the restrictions on creditors have been lifted; they started being phased out from 1st October.
What is the new legislation surrounding businesses, the pandemic and insolvency?
The Government has now put in place targeted measures. These are effective from now until at least 31st March 2022 and they’re designed to give smaller businesses a chance to get back on their feet and in good financial health before creditors are allowed to take action to wind them up.
It’s worth noting the debt threshold was raised to £10,000 which means that creditors can’t insist on the repayment of what could have been a relatively small debt - the previous threshold was £750.
It should also be noted that the legislation requires creditors to seek proposals for payment from a debtor business and it allows 21 days for a response before they can proceed with winding up action.
The Insolvency Service has recently issued recommendations concerning the Bounce Back Loan Scheme. They’re asking Insolvency practitioners to adopt an ethical stance on matters surrounding how any remaining money has been used. This means that there is some allowance being made for funds to be used in the insolvency process - but this will need to be within reason!
Let’s be clear though, prior to the company going insolvent, detailed reporting needs to have already been in place. You need to keep your records up to date. This has been specifically stated by the Insolvency Service.
You can read about the legislation in more detail along with Business Minister Lord Callanan’s comments on the matter over atGOV.UK.
The Coronavirus Job Retention Scheme has come to an end.
There is no further financial support available in relation to employees. The furlough scheme, which has supported some 11.6m workers at some point during the pandemic, came to an end on Friday 1st October. Thus many employers have had to consider whether or not employees can be brought back. Their decision will be dictated by trading levels.
Some businesses might find themselves in a situation where they cannot afford to keep staff on but they cannot afford redundancy either. The solution might involve a formal insolvency procedure which will help ensure that employees can access statutory redundancy pay.
The end of furlough is at least welcomed by some economists who have been concerned about a stagnating job market among other things. It is hoped that the cogs will gradually start moving again now employees are returning to their jobs or of course sadly facing redundancy. This could yield positive results for businesses that have been struggling to recruit.
In other good news, British publication The Economist this week reported revised figures which showed that the British economy grew by 5.5% in Q2. This is a much faster pace than an initial estimate had predicted. It’s not all doom and gloom.
If you’d like any help navigating the frequently changing legislation of the pandemic, get in touch - we’d love to help you. We are an East Midlands based accountants with an office in West Bridgford, Nottingham and we work with businesses and individuals throughout the UK.
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