Moving the Goalposts: What do the extensions to the CIGA mean for me as a creditor?

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We know that the pandemic has been a tough time for us all, both in our personal and professional lives. It has been particularly worrying for business owners, especially those who have been directly affected by business closures, temporary or permanent. To mitigate a lot of these issues, the government introduced multiple measures and financial aid, one of which was the Corporate Insolvency and Governance Act 2020. The Act was brought in to help companies in financial distress that was caused directly by the pandemic. The Act has been extended on multiple occasions and if you’re wondering what the extensions to the CIGA mean for you as a creditor then read on to find out.

What is the CIGA for?

The CIGA came into force in June 2020 and introduced two new restructuring options as well as the dissolution of wrongful trading liability. It also enabled the prevention of winding up petitions and statutory demands, a strong tool for creditors to recover debts owed to them by organisations who were continually failing to pay and avoiding legal letters and demands.

When were the measures supposed to end?

The Act was only intended as a temporary measure and was due to come to an end in September 2020. As the deadline approached and the effects of the pandemic were viewed to extend much further than initially anticipated, the Act was extended to April 2021. There was then a further extension of the Act to June 2021. At this point, some of the measures were officially brought to an end. The suspension of directors’ liability for wrongful trading has now been rescinded. However, winding up petitions and statutory demands are still not able to be levied by businesses just yet, with the extension of these powers now due to end in September 2021 (pending no further extensions).

What do the extensions to the CIGA mean for me as a creditor?

If you are hoping to pursue a debt and your debtor is unable to pay, specifically as a direct result of the pandemic, then you will be unable to utilise a winding up petition to attempt to recover the monies owed to you. It is a stark reminder that despite the country opening up and returning to some form of normality, many businesses have suffered long-term financial difficulties, which will take some time to recover from. However, if the debts pre-date the pandemic or the coronavirus test can be satisfied then you may be able to pursue a winding up petition.

What is the coronavirus test?

The coronavirus test was created to determine if a winding up petition can be served or not. A creditor must have reasonable grounds to believe that:

  • Coronavirus has not had a financial effect on the company

OR

  • The debtor would not have been able to pay its debts even if coronavirus had not had a financial effect on the company.

How do I know if I can proceed with legal action to collect my debts?

The most straightforward way to ensure that you are using the correct tools at your disposal to recover commercial debts is to engage with a third-party expert. An organisation like My Debt Recovery is up to date with the latest regulatory changes and we already have a good understanding of how the legal landscape lies. We are able to engage with you and your debtor to discover how the situation relates to coronavirus and determine what the most appropriate method for collecting the debt will be.

We have successfully been able to help our clients recover monies owed to them throughout the pandemic and we can help you to do the same. Reach out to our team today and start the discussion to find out how the My Debt Recovery team can work with you to get your money back where it belongs.

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