The UK government has proposed for retrospective changes to reform UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.
The government said that the new law would include provisions introducing a “moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure”.
Commenting on the presentation of the Corporate Governance and Insolvency Bill to Parliament, UKHospitality CEO Kate Nicholls said: “This is a very important piece of legislation from the Government and something for which UKH has been pushing. The Bill should provide businesses with some very welcome respite from aggressive landlords and valuable breathing space to restructure their businesses. It is very encouraging to see the Government listening to the concerns of tenants and landlords, and acting decisively on what is a complex issue.
“It should give some impetus for bringing landlords to the table to understand the pressures that tenants are facing. The majority of landlords have been cooperative but a minority have aggressively pursued hospitality businesses that are moth-balled, have no revenue and cannot hope to pay. It is also positive to see protection extended to landlords to ensure they are not obliged to pursue tenants.
“Extension of the moratorium would allow more time for businesses and Government to get to grips with the scale of the crisis so we can begin to work out long-term solutions to protect local communities. Measures in the bill will provide more breathing space to deliver rent solutions with lower rent liabilities through mandated agreements.”
The Bill introduces a moratorium on the use of statutory demands made between 1 March 2020 and 30 June 2020 and winding up petitions presented from 27 April 2020 through to 30 June where a company cannot pay bills due to COVID-19.
Earlier in the week UKHospitality wrote to the government urging it to intervene and broker a solution that solves the current stalemate on rent in the sector.
The organisation said that hospitality businesses were still being “aggressively pursued by a minority of landlords”.
In a letter to Business Secretary, Alok Sharma MP, UKHospitality said that these businesses, the vast majority of which had virtually no income and were closed during lockdown, were still being threatened with winding-up petitions, having deposit funds taken and being served with County Court Judgements.
UKHospitality warned that, although the government has urged tenants and landlords to work together to find solutions, the commercial property market was “effectively broken”. In a recent survey of sector business leaders from CGA and Fourth, rent payments and securing landlord agreements were the top priority for 67% of respondents.
The letter called on the government to urgently step in to broker a solution at a high-level Ministerial summit, based on the following principles:
- All relevant stakeholders must be involved
- Government intervention – both financially and legislatively – is necessary
- The assumption that the vast majority of hospitality and leisure businesses will not be able to pay rent for the remainder of 2020
- There must be a ‘sharing of the pain’ between tenants, landlords, investors and government
- Action must be taken swiftly, with a resolution before the next quarterly rent date at the end of June.
UKHospitality CEO Kate Nicholls said: “In June, sector businesses are due to pay nearly £800m in rent, having been forcibly closed and generated no income for over three months. We appreciate that landlords have their own financial pressures and the majority of landlords have been happy to work with tenants to find solutions, but a damaging minority continue to put pressure on beleaguered hospitality businesses at the worst time.
“Having discussed this issue with a vast number of industry bodies, it’s clear we need a National Time Out on rent as the vast majority of hospitality and leisure businesses will simply not be able to pay for the rest of the year. The Government must step in quickly to help hospitality businesses, landlords and investors find a mutually beneficial solution. We are ready and eager to sit down with all stakeholders to thrash out an equitable solution, with the Government acting as honest broker.
“If the commercial rental market collapses, it will be to the long-term detriment of the whole economy and lead to millions of hospitality workers losing their jobs and swathes of businesses permanently closing their doors.”