No Go with Winding-Up Petitions – The Latest Suspension to 30 September 2021

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No Go with Winding-Up Petitions – The Latest Suspension to 30 September 2021

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In a move that will only frustrate many (now longstanding) creditors, the Government has announced yet a further 3-month extension – now through to 30 September 2021 - to the “temporary” restrictions in Schedule 10 of the Corporate Governance and Insolvency Act 2020 (“CIGA”) on issuing statutory demands and winding-up petitions.

For corporate debtors, this latest extension provides further respite and seeming protection from creditors seeking enforcement action over debts. However, debtors would be well advised not to see the prohibitions in Schedule 10 CIGA as giving them complete immunity from creditor action.

 

The restriction in Schedule 10 CIGA itself, provides that a winding-up petition may not be issued unless the creditor has reasonable grounds for believing and can evidence that Coronavirus has not had a financial effect on the debtor company. Since March 2020, this has in practice amounted to a moratorium on issuing winding-up petitions on post-March 2020 debts or “Pandemic Debts”. This is because creditors will rarely, if ever, be able to produce evidence to prove a debtor has not been financially affected by the Covid 19 Pandemic.

 

The restrictions will not however apply to “Pre-Covid Debts” (i.e., those which became payable and/or overdue before 1 March 2020). Here, where a creditor has reasonable grounds to believe and can evidence that the debtor company was unable to pay their debts or, would have become insolvent in any event, notwithstanding any adverse financial impact suffered by Coronavirus since March 2020, that creditor would be allowed to proceed with a winding-up petition.

 

Moreover, the restrictions in Schedule 10 of CIGA only concern winding-up petitions. They do not bar a creditor completely from taking enforcement action in respect of debts. Letters of Demand, Statutory Demands and issuing County Court Claims in respect of debts, all remain available to creditors and should be utilised.

 

As to when the restrictions on winding-up petitions will finally end, the pervasive view is that they will be co-terminus with the eventual ending of the Government’s furlough / Coronavirus Job Retention Scheme, which is currently set to expire on 30 September 2021.

 

Until the restrictions on winding-up petitions are lifted however, our message to creditors would be to continue exploring and utilising other methods of debt recovery. In our experience during the Covid-19 Pandemic, these have proven equally effective and often less expensive than winding-up petitions in recovering both stand-alone and book-debt ledgers.

 

Contact Us

 

If you are concerned over collection of debts, security enforcement and/or debtors seeking to rely on the Covid 19 Pandemic to avoid payment, please contact William Angas and Ben Ashworth

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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