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Law360, London (June 17, 2021, 1:37 PM BST ) The government has announced that it is extending by three months a COVID-19 relief measure that protects companies from enforcement action by creditors if they have fallen into debt because of the pandemic.
The Insolvency Service said on Wednesday that the government will extend temporary insolvency relief measures introduced under the Corporate Insolvency and Governance Act 2020. The government introduced the law in March 2020 to give companies hit by the coronavirus crisis some breathing space. It was due to expire at the end of June.
The government agency said that "restrictions on statutory demands and winding-up petitions will remain for a further three months until Sept. 30 ... to protect companies from creditor enforcement action where their debts relate to the pandemic."
The measures mean that creditors cannot issue statutory demands, a written debt warning or a winding-up petition — legal action taken by creditors to recover money — until the end of September. The support measures have been extended several times since they were introduced. The moratorium means that businesses undergoing the restructuring process cannot be put into administration by creditors. This will end on Sept. 30.
Law firm Kingsley Napley said the extension was widely expected by insolvency practitioners, after Prime Minister Boris Johnson decided this week to push back the U.K.'s exit from lockdown by four weeks.
"The extension of these restrictions will be welcome relief to many businesses continuing to struggle financially due to the coronavirus pandemic," Michael Mulligan, insolvency partner at the firm, said on Thursday. "However, many will consider this to be yet another example of the government 'kicking the debt can down the road' — which will inevitably lead to an avalanche of corporate insolvencies at some point."
The government measures also allowed directors of limited liability companies to trade even if they were not certain that their business could continue to meet its debts. This was previously a civil offense that saw directors being held personally liable. But this measure ended on April 30.
Companies have also been given flexibility over the requirement to hold annual general meetings. They were able to hold annual general meetings online until March 30, bringing them in line with public health guidance, so that shareholders can scrutinize a company's papers online.
The bill came in response to Boris Johnson's decision to order a nationwide lockdown of all non-essential businesses in March 2020 to help stem the spread of coronavirus.
--Editing by Joe Millis.
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