With the removal of some temporary restrictions introduced during the pandemic, Peter Worrall, associate solicitor at Moore Barlow, lays out the current state of play for credit managers and what
legal tools are available to them again to reclaim debt.
Credit managers know that chasing down unpaid debt can be difficult and it’s no secret that it was even more of an uphill battle during the pandemic.
The Corporate Insolvency and Governance Act 2020 was introduced as part of the Government’s package of support for businesses during the pandemic. The measures introduced restricted creditors
from serving statutory demands and issuing winding up petitions for unrecovered debts. Latterly, this included a requirement to serve a 21-day formal notice and that the debt had to exceed £10,000.
Without having winding up petitions in the arsenal, many creditors turned to county court judgements as a last-ditch attempt to recover losses – something which proved equally as challenging for credit managers to secure due to the time and costs, while putting debtors in an even more difficult position financially.
Thankfully, as world has started to normalise post-pandemic, so have the rules around debt recovery.
Where are we now?
In a return to business-as-usual for creditors, restrictions were relaxed from 1st April 2022 allowing credit managers to present winding-up petitions against companies for debts of £750 or more.
Creditors will no doubt welcome the ability to petition for debts less than £10,000 again, with the removal of the requirement to issue a 21-day notice for payment set to speed up the debt recovery process once again.
As creditors look to clear the backlog of historic cases, a windfall of winding up petitions and debt recovery is to be expected as we head into the second half of the year. This is most likely to clog up
the bureaucratic process and seeking out of court solutions will be key to recovering debt quickly – agreeing reasonable and amicable repayment plans with debtors where possible.
Commercial rent arrears
Whilst most corporate insolvency restrictions have been lifted, it’s a different picture when it comes to sums owed due to commercial rent arrears.
The Commercial Rent (Coronavirus) Act 2022 came into force on 24 March 2022 and set out to prevent an onslaught of tenant insolvencies as a result of the pandemic. Businesses that were forced to close during lockdown and have accrued rent arrears in the process remain protected, with landlords unable to enforce recovery of unpaid rent through petitions.
Where landlords and their tenants have failed to reach an agreement on the payment of rent accrued from when the business was closed, the Government support measure aims to secure relief through arbitration for tenants who are unable to pay lockdown arrears. Landlords can look to either seek to reach an agreement with the tenant for unpaid rent or make a referral to the government scheme to work towards resolving the matter. Whilst the Act stipulates that landlords may not forfeit a lease for non-payment of rent during the moratorium period or issue winding up proceedings relating to rent arrears accrued during the pandemic and this is now extended to pursuing court or bankruptcy proceedings in relation to rent arrears accrued during the pandemic; this does not mean that, rent arrears accrued for other reasons or periods cannot be pursued or, you cannot forfeit on other grounds.
In many ways, the situation for credit managers has returned to a pre-pandemic norm, but with some key differences around commercial rents that practitioners must be aware of.
To learn more about these changes, and what businesses can do to recover debts owed to them, contact peter.worrall@moorebarlow.com
About Moore Barlow:
Moore Barlow is one of the UK’s leading law firms, focused primarily on meeting the needs of private individuals & families, owners and leaders of fast-moving organisations and businesses, and people
whose lives have been affected by serious accidents or negligence.
With 70 partners, 272 lawyers and legal professionals, and a total staff of nearly 500, Moore Barlow has offices in Southampton, Guildford, Woking, and Lymington, as well as two locations in London
(Richmond and the City).
The firm is a member of IR Global – a multi-disciplinary professional services network that provides legal, accountancy, financial advice to companies and individuals around the world – and is the sole
UK legal advisor within Ecovis, an international network of more than 7,500 lawyers, accountants, and consultants with capability around the globe.
For more information, please visit www.moorebarlow.com
