U.K. Government to End Temporary Insolvency Measures

The U.K. Insolvency Service has announced that temporary measures introduced last year to help viable businesses avoid being forced into unnecessary insolvency during the COVID-19 pandemic will be phased out from October 1, Business-Sale.com reported. The end of the previous legislation will occur alongside the introduction of new measures to help businesses recover. The Corporate Insolvency and Governance Act, which came into force in June 2020, introduced several temporary measures designed to help businesses through the COVID-19 crisis. These included temporary changes to prevent statutory demands and winding up petitions, as well as the suspension of wrongful trading provisions. During the COVID-19 pandemic, measures such as the Corporate Insolvency and Governance Act, along with government financial support, have caused a sharp decline in administrations and insolvencies. According to one analysis of government figures, UK corporate insolvencies fell by more than half in the first half of this year (301), compared to the same period in 2020 (655). While such measures have undoubtedly helped many viable businesses survive the pandemic, they have also led to fears that “zombie” companies are being kept alive solely by government support. This has prompted forecasts that the withdrawal of measures such as government-backed financing and insolvency protection, alongside the debts accrued by businesses from government loans and rent arrears, could cause a huge wave of company insolvencies. Read more.