Home Finance & Investments Yorkshire insolvency expert warns of winding-up legislation changes

Yorkshire insolvency expert warns of winding-up legislation changes

Eleanor Temple, chair of R3 in Yorkshire

Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, is warning the region’s directors to seek advice if their business is distressed, following a change in the winding-up petition threshold on the 1st April.

Companies can now face a winding-up petition for debts of £750, after temporary legislation which had previously set the winding up petition threshold at £10k expired on March 31st.

Ms Temple is warning this could result in distressed businesses facing action from their creditors if they haven’t already come to an agreement about managing their debts.

“Now, more than ever, it’s critical company directors seek advice if they’re worried about their businesses or concerned about their ability to pay staff, landlords or suppliers,” she said. “If they don’t, they could face the financial, operational and emotional effects of contesting winding-up petitions in court over a debt of £750.”

Ms Temple continues: “Over the last two years we have seen a number of instances where creditors have recognised that that engagement leads to better outcomes then enforcement.

“Many creditors appreciate the climate that businesses are operating in, and are willing to have a conversation about how and when they can be paid, but that needs to take place sooner rather than later.

“Company directors need to have the conversation about the financial situation they’re in, what they owe and who they owe it to with an expert so they can develop a plan for settling their debts, before creditors resort to legal action to recoup what they are owed.”
Restrictions preventing commercial landlords from issuing winding-up petitions against limited companies for unpaid rent during the pandemic also expired on March 26th. Ms Temple is urging businesses who are concerned about this to seek advice about their problems.

“Rent is typically one of a business’ largest expenses – especially in the retail and service sectors, and many directors may have found the amount they owe has increased if the pandemic has affected their ability to trade,” she says.

“It will be a while before the business environment returns to pre-pandemic levels, and companies will already have to face the prospect of increased fuel and energy costs affecting their bottom line and their cashflow levels, which will make balancing the books a lot harder without any kind of specialist help.

“If you’re worried about your business’ financial position, or you’re having problems paying suppliers, taxes or staff – which is a clear sign your business is financially distressed – seek advice from a qualified source, someone who can outline the potential options open to you for resolving the situation your business is in.

“We know how hard it is to talk about your concerns about your business, but doing so typically leads to better outcomes if it’s had earlier than later – and gives you more potential options and more time to take a decision than if you’d waited until the problem worsened.”