Corporate Insolvency & Governance Act 2020

New Business Support Measures - Back to the Drawing Board?

At the time of writing this article it has recently been announced that an extension of the temporary insolvency measures that were due to be lifted on the 30th June 2021 have now been extended until the 30th September 2021.

In particular, the ‘Suspension of serving statutory demands and restrictions on winding-up petitions where unpaid debt is due to Covid-19 (two measures). Statutory demands will be void if served on a company during the “relevant period” (between 1 March 2020 and 30 September 2021). The aim is to give businesses the opportunity to reach realistic and fair agreements with all creditors. Winding-up petitions presented during the “relevant period” on the basis that a company is unable to pay its debts will be reviewed by the court to determine the cause of non-payment. Where the unpaid debt is due to Covid19, no winding up order will be made’ In essence this means that a statutory demand served during the relevant period will be deemed void and a court would determine whether a winding up order would be made should a petition be presented.

Whilst these measures are welcomed for the vast majority of companies struggling to survive during this economic crisis it begs the question ‘is this fair for all and is it open to abuse?’

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The reality of the above is that creditors will be reluctant to issue winding up proceedings in the fear that a court will not make the winding up order and therefore costs incurred will potentially be wasted.

Being in the debt collection industry we see a vast array of different circumstances and those genuinely in difficulty will reach out and open communication with creditors in order to come to an amicable solution for both parties and this is the preferred option for all concerned.

Having said that we also see the other ‘dark’ side of the coin whereby companies will incur debt for either goods or services well into the pandemic knowing full well they cannot pay back their debts and there is little recourse for the creditor without having to take a large risk.

For example, a client of ours provided services to another company during the period Jan-21 to Mar-21 (9-12 months into the pandemic). Our client instructed us when the debt was 30 days overdue. At the time of providing the services the debtor company had no adverse credit or county court judgments (CCJ). From the 30th April 2021 to 14th June 2021 (45 days) they have racked up 6 CCJ’s worth £58,000.

On that basis there is little point in our client obtaining another judgment and adding to their ‘collection’. The alternative would be to issue a winding up petition, but this comes with the risk of if not being permitted and wasted costs. My question here is, ‘Where is the justice to creditors?’

Whilst we appreciate there are two sides to the story, the debtor company have made no effort to contact us despite numerous attempts via different methods and one can therefore only assume they have no intention of settling their debts.

A cynical person would say that they are purposely exploiting the current framework by running up debts, leaving the company insolvent and waiting for a creditor to wind them up which will take several months after the restrictions have been lifted at which point a certain period of time has elapsed and the liquidators will not be able to pursue the directors for possible ‘wrongful trading’ had the creditor the option to take action now.

We appreciate this article may be controversial to some but a reality for others.

Our view has always been to try and engage with all parties to try and resolve matters amicably however when there is a deafening sound of silence, action must be taken in the appropriate circumstances.

For any help or guidance feel free to contact us at

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