There was some welcome news for creditors as the restrictions that had been put in place on statutory demands have been lifted and the temporary rules preventing winding-up petitions from being presented have been replaced. These restrictions were originally put in place by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) on 27th April 2020 in direct response to the coronavirus pandemic to provide flexibility as businesses struggled to negotiate the immediate effects of the crisis. While a relief to debtors, many creditors have been left unable to claw back significant losses as a result.

Winding-up petitions are commonly used as a last resort in commercial debt matters and are an effective method to focus a debtor’s attention on repaying any outstanding debts. The new rules for presenting a winding-up petition will be a valuable tool for creditors in the coming months.

As the economy re-opens, the new Schedule 10 to CIGA 2020 sets out conditions that must be met for presenting a winding-up petition from 1 October 2021 until at least 31 March 2022:

  1. A creditor may not present a winding-up petition in respect of commercial rent that is unpaid because of a financial effect of coronavirus. This provision supports the extended moratorium on forfeiture for commercial tenants. Given public sympathies, the threshold for a debtor to prove that coronavirus has had some effect on their ability to pay rent is likely to be very low.
  2. A creditor may not present a winding-up petition if it is for a debt or debts totalling less than £10,000.
  3. A creditor cannot present a winding-up petition unless written notice (a Schedule 10 Notice) has been delivered to the debtor seeking their proposals for payment of the debt, and they have not made a proposal that is to the creditor’s satisfaction within 21 days.
  4. A creditor will again be able to rely on non-payment of a statutory demand to evidence a debtor’s inability to pay their debts, provided the other conditions are met.

Reflecting on these changes, our Associate Solicitor in Litigation, Catherine Roberts, commented: “These temporary measures signal a step back towards ‘normality,’ allowing creditors who are dealing with significant loss to take action, whilst also providing ongoing protection for businesses continuing on the road to recovery in the aftermath of the coronavirus pandemic.”

If you require any help and assistance with recovery of a commercial debt, then please do not hesitate to call a member of Litigation team for tailored and specialist advice.

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