The government’s decision to extend the ban on winding-up petitions will give struggling firms a welcome breathing space, according to the North West branch of insolvency and restructuring trade body R3.
Allan Cadman, North West chair of R3 and a partner at Poppleton & Appleby, said the extension until 31 March 2021 was good news for many struggling firms trying to make the most of a choppy pre-Christmas trading period.
“Firms now have an extra three months largely free from the threat of creditor action, which means more time to try and get back on an even keel. However, despite the positive impact the announcement will have, these measures can’t be extended indefinitely.
“The big question for the Government is how these support measures can be withdrawn next year in a way that doesn’t lead to a cliff edge for businesses that have weathered an unprecedented year of trading difficulties.”
He is urging the government to ensure that HMRC takes an engaged and supportive approach to its role as a key creditor in most insolvencies. New rules introduced last week mean that when a company becomes insolvent, HMRC has preferential status, allowing it to ‘jump the queue’ for payment ahead of smaller suppliers and pension funds.
Allan added: “With its new preferential status, HMRC’s support as a creditor will be required to ensure that viable restructuring proposals can be agreed – proposals that could potentially save thousands of jobs and businesses as the UK adjusts to a post-COVID environment next year.
“In the meantime we would urge anyone who is concerned that their business is starting to struggle to seek advice from a qualified professional as early as possible. Doing so will give them more options and more time to make a considered decision.”