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 £10,000 expired on March 31.
Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, has warned this could result in distressed businesses facing action from their creditors if they haven’t already come to an agreement about managing their debts.
She said: ““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.
“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.
“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 26.
Ms Temple said: “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.
“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.”
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