Lean time for lenders?

The Corporate Insolvency and Governance Act 2020 makes some temporary and some permanent changes to UK insolvency law, one of which has the potential to change the way lenders and qualifying charge holders can enforce their security.

The new Moratorium gives directors time, without pressure from creditors (including banks), to see if they can rescue the company as a going concern. 

Whilst this new rule gives companies some much needed breathing space it may make lenders more reluctant to lend to “riskier” businesses. The lender may also use the company entering into a moratorium as an opportunity to pursue directors under any personal guarantees.

Banks face a double whammy as HMRC will become a preferential creditor from 1 December which will devalue their floating charge security

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