After almost two years of changing restrictions from the Scottish Government regarding Coronavirus it was welcome news that Scotland will be getting inching back to having less restrictions on our personal and business lives.
The Coronavirus (Scotland) Acts (Early Expiry of Provisions) Regulations 2022 is repealing changes made throughout the pandemic that are important to be aware of.
Since the beginning of the pandemic, the Scottish Government has introduced two emergency Coronavirus Acts and other Regulations in order to help people and businesses survive during some very testing times. Now that Scotland looks to be in a position where it is coping with the Omicron variant and edging to normality, the Government looks to reassess and expire some of its legislation in March 2022. Conversely, Government will also extend some legislation if it considers the extension to be necessary, proportionate and appropriate and even permanently retain some it in a Coronavirus (Recovery and Reform) (Scotland) Bill currently going through Parliament.
Asides from the relaxing of restrictions on our personal lives, there are some removal of restrictions affecting our businesses that are worth considering if you’re worried about unpaid commercial rent or other debts..
Irritancy Clauses in Commercial Leases
Irritancy is a contract remedy which allows a landlord to end a commercial lease if a tenant is in breach of its monetary or non-monetary obligations. Prior to the pandemic, in the event of a tenant failing to pay its rent, a landlord could irritate the lease by giving only 14 days’ notice.
The pandemic quickly had an impact on businesses as they had to close during lockdowns and tenants began to ask their landlords for rent reductions and breaks. In order to help commercial tenants, the Scottish Government introduced section 6 and 7 of Coronavirus (Scotland) Act 2020 which extended 14 days to 14 weeks. Landlords who have struggled to manage rental income may very well be pleased to hear that the Scottish Government are not proposing to extend this change further and this extension will end on the 31st March 2022.
Insolvency - Extensions and Expiries
Section 3 and schedule 2 of the Coronavirus (Scotland) Act 2020 introduced a temporary extension of moratoriums on diligence from 6 weeks to 6 months. A moratorium is a period of time when creditors cannot take any action against a debtor. The extension was to allow individuals more breathing space to figure out how to deal with their debts and time-limited income shocks. Due to the need for enhanced protections for those in financial distress it is likely this provision could be extended beyond 31st March 2022.
Another likely extension is regarding a creditor making a bankruptcy petition against a debtor. Pre-Covid, the Bankruptcy (Scotland) Act 2016 stipulated that for a creditor to seek a petition for bankruptcy against a debtor, they must be due at least £3,000. Schedule 1, part 5 of the second Coronavirus Act increased this amount £10,000. It would seem that Scottish Ministers after having consulted with stakeholders regarding both the time extension on a moratorium and the increase on debt level for bankruptcy petition, have come to the decision that extending both of these would be proportionate and strike a fair balance between debtors and creditors.
Outside of the Coronavirus Scotland Acts, the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 also contained temporary easements. Among other things the regulation increased the thresholds which a company must owe to a creditor before the creditor may present a winding up petition from £750 to £10,000. Furthermore, there is a requirement that the creditor must seek proposals for payment from a debtor and allow them 21 days to respond. Although these measures were effective in limiting insolvency cases during the pandemic, it appears there are no current plans to extend this temporary measure beyond the 31st March 2022.
Coronavirus (Recovery and Reform) (Scotland) Bill
The Coronavirus (Recovery and Reform) (Scotland) Bill 2022 proposes changes in 30 specific legislation areas. It comes of the end of a 12-week consultation process involving individuals and organisations. Once passed, it will seek to permanently increase the threshold for bankruptcy petition to £5,000 as well as cement changes regarding ‘deemed service’ of documents; meaning debtors cannot simply hide from the Sheriff Officer or postman. Furthermore, rules surrounding remote meetings, virtual signings and e-delivery of documents look to be permanently implemented through this Bill, demonstrating a modern approach being taken by the Scottish Government to life after Covid. The is set to be passed later this year and I shall keep you updated!
Insight from Pamela Muir, Insolvency, Restructuring and Corporate Partner at Thorntons. For more information contact Pamela on 03330 430350 or email pmuir@thorntons-law.co.uk.
