As the lockdown restrictions start easing there is some interesting news around the changes to the insolvency rules specific to Statutory Demands, Winding up Petitions and the use of a new Moratorium and new Restructuring Plan to aid the rescue or restructure of a business.
There are bans on issuing Statutory Demands and Winding up Petitions until at least the end of June and possible several months more. This should give businesses affected by the current emergency time to try to restructure their businesses.
The Moratorium gives businesses a breathing space to allow time to explore restructuring or refinancing options. The Restructuring Plan is intended to be a flexible tool where the courts can overrule dissenting creditors in certain circumstances. Both are designed to help previously successful businesses recover from a specific financial problem, such as losing a major customer, or the interruption to trade that many are currently experiencing.
Currently, a major obstacle to restructuring a business is the approach of key suppliers. After restructuring, suppliers often refuse to supply, or change the terms of trade to cash on delivery, or even worse cash on delivery plus a pay down of the old debt. Under the new provisions, once the restructuring plan is approved, current suppliers who incur a loss must still continue to supply the business on their normal contractual (pre restructuring) terms. There are a few exceptions to assist small businesses to try to prevent them from suffering undue hardship.
All of the planned changes are aiming to ensure that businesses can maximise their chances of survival after this extraordinary period of economic (in)activity. They are being debated in parliament on 3 and 9 June with the aim of becoming law in the next few weeks. We are excited about the opportunities the new law will give us to help businesses recover and move forward as the economy starts to improve. There are pros and cons to the changes, and we expect to advise many who wish to use them, and those who are themselves struggling because of the effects of the new laws.
The above is just a snapshot of the changes, should you require a more in-depth discussion please contact Dave Beech on 07852 344 322 or email Dave.email@example.com A conference call can also be arranged using various platforms.