The Midlands branch of national insolvency and restructuring trade body R3 is warning the region’s directors to seek advice if their business is distressed, following a change in the winding-up petition threshold at the beginning of this month (1 April).
Companies can now face a winding-up petition for debts of £750, after temporary legislation which had previously set the threshold at £10,000 expired on March 31.
Increasing numbers of distressed Midlands businesses could now face action from their creditors if they have not already come to an agreement about managing their debts.
R3 Midlands chair Eddie Williams, a partner at PwC in the East Midlands, 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.
“Encouragingly, over the last two years we have seen a number of instances where creditors have recognised 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.”
Restrictions preventing commercial landlords from issuing winding-up petitions against limited companies for unpaid rent during the pandemic have also expired.
Eddie Williams continued: “Rent is typically one of a company’s largest expenses, especially in the retail and service sectors. Coupled with the prospect of increased fuel and energy costs, balancing the books could become considerably more challenging for local businesses.
“If you’re worried about your company’s financial position, or you’re having problems paying suppliers, taxes or staff, it is crucial to seek advice from a qualified source. Doing so sooner rather than later typically leads to better outcomes and can provide more options.”
