March 4, 2021
Full articleThis week has seen very positive news about the effectiveness of the vaccine in reducing hospital admissions and politicians north and south of the border setting out plans for emerging from lockdown. The details and dates for lifting restrictions are somewhat uncertain but it is hoped that during April and May retail, hospitality and other sectors will be able to reopen and that we may even be able to remove all restrictions in late June or July. As restrictions on economic activity are lifted, it is likely that the Government will also lift measures currently in place to ease creditor pressures on businesses.
At present, creditors are unable to raise winding-up petitions against debtor companies. The restriction on creditor winding up petitions is currently due to end on 31 March 2021 (an extension from the original expiry date of 30 September 2020). There has been no announcement from the Government as yet about whether that date will be extended again. While winding up a debtor company is a last resort, it is a useful tool for creditors and the release of the restriction on creditor petitions will allow creditors to take a more aggressive approach to pursuing debts.
When the last expiry date for the restriction on creditor winding up petitions approached in September, we commented on the implications for creditors and debtors [Winding up petitions – the end of the moratorium]. Again, creditors will need to be mindful of whether debtors are likely to be able to meet the debt. Furlough, deferred tax payments and uncertainty about the future business landscape may mean that many companies will be unable to pay. Creditors will need to be careful that they do not “throw good money after bad” in chasing debts that will never be repaid. While we still have a few weeks before the restrictions on winding-up petitions are lifted, creditors would be well advised to review the debts and debtors and the ability of debtors to pay.
Debtors need to be aware that creditors may be able to exert more pressure to pay when the possibility of winding up debtor companies is again available. Reviewing the financial position of your business and coming to repayment agreements with creditors now is advisable. If repayment is going to be a challenge then debtor companies should be taking advice on their financial position and ability to trade going forward.
If you would like further information on the topic discussed in this article, please contact a member of the Insolvency Team.
Steven Jansch by email: sjansch@gilsongray.co.uk or by phone: 0131 516 5361 / 07841 920 100.
Eilidh MacEwan by email: emacewan@gilsongray.co.uk or by phone: 0131 285 1809 / 07376 192 463.
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.
