With the government support packages due to come to an end, 2022 could be a very busy year in the insolvency arena. This is what can be expected.
The current restrictions on winding-up petitions under Schedule 10 of the Corporate Insolvency and Governance Act 2020 are currently set to end on 31 March 2022. The restrictions mean that creditors cannot present a winding up petition for a debt worth less than £10,000 and even then, without first giving the debtor 21 days to pay and the opportunity to make proposals for payment. There has been no indication from the government that the restrictions will be extended beyond March 2022 so the working assumption must be that the use of winding-up petitions will be free from restrictions as of 1 April 2022.
Commercial rent arrears
The Commercial Rent (Coronavirus) Bill 2021-22 is likely to reach the statute book in the first quarter of 2022. It introduces an optional statutory arbitration process for commercial rent arrears that accrued while the tenant’s business was required to close due to coronavirus. The relevant arrears period can span from 21 March 2020 to (at the latest) 18 July 2021 (for England) and 7 August 2021 (for Wales).
There are restrictions on winding-up and bankruptcy petitions in respect of tenants owing such protected rent debt. As regards winding-up petitions, a landlord cannot petition between the date the Bill comes into effect and six months later, if the debt isn’t referred to arbitration, or until the arbitration concludes if it is referred.
Disqualification for Directors of Dissolved Companies
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 received Royal Assent at the end of last year and the provisions relating to directors of dissolved companies came into force on 15 February 2022. The legislation gave the Insolvency Service new powers to disqualify directors of dissolved companies. It is the latest in a range of measures to tackle the practice of creating a phoenix company that can carry on the business established by a director, leaving behind liabilities accrued to the previous trading company that is simply struck off and dissolved.
First review of the Insolvency Rules 2016
The Insolvency Service must publish its first report on how the Insolvency Rules 2016 are operating in practice by April 2022. The report will highlight any significant gaps in law or situations covered by the rules, and any places in which the rules are contradictory or unclear.
Changes to the regulation of IP’s
The consultation into the regulation of insolvency practitioners closes on 25 March 2022. The consultation proposes a radical reform of the system of regulating insolvency practitioners, including the move to a single governmental regulator. It also suggests interim measures to reform the bonding regime pending a potential new compensation regime.
Company Voluntary Arrangements (CVA’s)
In March 2022 the Court of Appeal will hear the appeal in the landlords’ challenge to the New Look CVA. The outcome of the case will have an important role to play in the continued use of CVA’s as a restructuring tool in cases where landlords challenge their use to cram down specific types of creditors, while leaving other unsecured creditors unaffected. If restrictions are put on the use of CVA’s, it is likely we will see a resulting increase in the use of the new restructuring plan process, which was introduced by CIGA in 2020.