As the planned lockdown release date of the 21 June has come and gone, we all look forward to the 19 July with relish. As lockdown financial support and protective measures for businesses have now been extended 4 times since lockdown commenced, it's hard to keep track of what has been extended and what has gone.
The Act which rushed in all these measures last year is the Corporate Insolvency & Governance Act 2020, which itself had a long stop date of 30 April 2021. Something of an incite into the Governments thinking at the time as to how long this would be necessary. The long stop date for the Act has itself now been extended to 29 April 2022.
The remaining majority of business protections were due to expire on 30 June 2021, but have now been extended again, save for the suspension of wrongful trading for directors and the helpful relaxation of corporate governance rules for convening virtual meetings and voting. As things stand when posting, both of these will still expire on Wednesday 30 June 2021.
Otherwise the following protections for businesses have been extended as follows:
- protection from statutory demands and winding up petitions for Covid related debt until 30 September 2021
- protection from forfeiture for rent of business tenancies until 25 March 2022
- protection from commercial rent arrears recovery action (CRAR) until 25 March 2022
- small company exemption from "ipso facto" clauses until 30 September 2021
- simplified business moratorium procedure extended until 30 September 2021
The noticeable disparity is the protection for business tenants from landlord rent arrears collections and winding up as a threat for non payment of rent being extended until March 2022 whilst full trading for all recommences 19 July 2021. Where landlords and tenants can not agree terms, the Government proposes that new legislation will be passed effectively compelling them to arbitrate a solution. How and whether that will work is yet to be seen.
In relation to business financial support, whilst repayment of BBILS & CBILS is now ready to gather pace, in summary:
- deferred VAT arrears payments recommence 1 July 2021
- business rate exemptions recommence payments 1 July 2021
- furlough scheme, employer 10% contribution payable from 1 July 2021, 20% contribution from 1 August 2021 to expiry of furlough scheme 31 September 2021
- Business Recovery Loan Scheme expires 31 December 2021
A recent survey of the UK SME sector suggested that 713,000 SME businesses are now experiencing significant distress. This is 15% higher than at the end of 2020. Record low formal insolvency appointments in Q1 for this year suggests that the extended protections and financial supports have done their job well and staved off failures for now, but already lobbying is heavy for more financial support to avoid significant failures and with it increased unemployment. However the support can't last for ever.
More sobering is that the £billions in support has to be paid for. Notably the majority of extended protections and financial supports expire 30 September 2021 and with them repayment will become the priority. All eyes for responsible directors now though on whether the suspension of wrongful trading will expire 30 June. Twenty four hours and counting.
"As the Covid restrictions lift and we begin to return to normality, businesses face three key challenges. First, they need to keep a careful eye on their cashflow levels to ensure they don't fall into the trap of over-trading. "They also need to make sure they have a plan for reopening in a way that's sustainable, so they don't undo their efforts to survive the last year by mismanaging the next couple of months. Additionally they need to think about how they will manage when the Government support measures end. Many company directors have delayed planning for this, but they need to use the remaining time they have to put a plan in place for the final quarter of this year and beyond, before the majority of the measures end .... and furlough is wound up in September." Colin Hague President of R3