As businesses reset for full reopening on the 19th July, you would be forgiven for missing that some of the temporary lockdown protection and support measures have been extended for a fourth time, but some have also been allowed to expire.
What business protections have been extended?
As at 30 June 2021 a number of lockdown business protections were due to expire following the scheduled full reopening on 21 June 2021, but given the delay in full reopening until 19 July 2021 these have been extended again as follows:
- Protection from statutory demands and winding up petitions for Covid related debt until 30 September 2021
- Protection from forfeiture for rent of business tenancies until 25 March 2022
- Protection from commercial rent arrears recovery action (CRAR) until 25 March 2022
- Small company exemption from “ipso facto” clauses until 30 September 2021
- Simplified business moratorium procedure extended until 30 September 2021
The most notable extensions are protection from rent enforcement by winding up or forfeiture or CRAR until 25 March 2022, in the meantime the Government is advocating commercial settlements for rent arrears between landlord and tenants. Failing that proposed legislation to enforce settlements by way of arbitration. Proposals are awaited.
What is the current position with financial supports?
There have been no new financial support measures announced and some repayment programmes have now commenced as follows:
- BBLS and CBILS repayment programmes commenced June 2021
- VAT deferral ends 21 June 2021, arrears payments recommence 1 July 2021 and hospitality VAT rate moves from 5% to 12.5% 30 September 2021
- Business rate arrears payments recommence 1 July 2021 and relief for DHL (Drinks, Hospitality and Leisure sector) reduced to 2/3rds discount
- Trade Credit Reinsurance Scheme ended 30 June 2021
- Furlough scheme employer 10% contribution payable from 1 July 2021, 20% from 1 August 2021 to expiry of furlough scheme 31 September 2021
- Business Recovery Loan Scheme expires 31 December 2021
- Partial business rate relief ends for DHL and hospitality VAT rate returns to standard 31 March 2022
Directors Duties – beware wrongful trading
Although full reopening has been suspended until 19 July 2021 and a majority of the business protections were extended, the suspension of wrongful trading for directors was allowed to expire on 30 June 2021. Consequently, notwithstanding the continued lockdown measures if directors wish to avoid becoming personally liable for the companies debts in the event of subsequent failure, directors need to be mindful that Covid is no longer a defence.
Cash flow projections are key
As part of the reset process directors need to ensure their business plans accommodate all the financial support changes and cash flow can adequately manage day to day trading requirements as well as increased furlough contributions, reduced reliefs, various arrears and loan support (if any) repayments. To meet their duties directors must ensure this is favourably balanced against the risk of continuing to trade and increasing losses for creditors, as well as any question of personal liability on failure for the directors.
Our corporate restructuring specialists are experienced in advising directors on their contingency planning to avoid these risks.
For further information contact Paul Dutton
