The Government’s New Regulations On Winding Up Petitions To Support Businesses Impacted By Covid-19 While Returning Back To The Pre-Pandemic Norm

The Amendment of Schedule 10 Regulations 2021 to the Corporate Insolvency and Governance Act 2020 is set to ease the restrictions over winding up petitions against a corporate debtor, taking effect on 1 October 2021 and set to last until 31 March 2022.

As a result of the Covid-19 pandemic, the Corporate Insolvency and Governance Act 2020 was put in place to restrict a creditor’s ability to present a statutory demand and winding up petition against a corporate debtor providing much-needed leeway for struggling businesses against the threat of winding up petitions.

Now, from 1 October 2021, those temporary restrictions – which were set to expire on 30 September 2021 – are being amended with new temporary regulations that are set to last until 31 March 2022. These regulations mean that a creditor may not present a petition for winding up unless the 4 conditions below are met:

Condition A is that the creditor is owed a debt by the company whose amount is liquidated, which has fallen due for payment, and which is not an excluded debt;

Condition B is that the debtor has been given written notice of the debt and an opportunity to provide repayment proposals for that debt;

Condition C is that at end of the period of 21 days, beginning with the day on which Condition B was met, the company has not made a proposal for the payment of the debt that is to the creditor’s satisfaction;

Condition D is that the debt is over £10,000.

In addition to these conditions, if the debtor makes proposals for payment after a creditor seeks a winding up order, the creditor must then give the court its reasons why the debtor’s proposals were unsatisfactory. The court will then review these reasons to conclude whether it can exercise its discretion to wind up a company.

Nevertheless, for commercial rent arrears built up during the pandemic, commercial landlords continue to be prevented from presenting winding up petitions onto them unless they can show that the reason for non-payment is unrelated to the pandemic.

The Schedule 10 Regulations are a reaction to the easing of pandemic restrictions with the winding up process slowly returning to its normal pre-pandemic order while continuing to support businesses still suffering from the economic fallout from the pandemic.

As well as this, these amendments are set to work alongside the proposed legislation in relation to the recently announced rent arbitration scheme. This scheme is set to apply to commercial tenants who have been affected by Covid-19 business closures and is set to encourage consensual agreement rather than continual court proceedings.

© Whitestone Chambers

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