David Murray and Louise Low, in our Dispute Resolution team, look at the impact of a partial lifting of winding up restrictions, put in place as a result of the COVID-19 pandemic, on companies.
Section 122(1) of the Insolvency Act 1986 permits a Court to wind-up insolvent companies.
Temporary restrictions on winding up insolvent companies were put in place, in a bid to alleviate the financial effect of the pandemic on debtors.
The initial temporary restrictions expired on 30 September 2021 and from 1 October, new temporary measures were implemented which will have effect until 31 March 2022.
These new temporary measures provide that a winding-up petition may only be presented if all of the following conditions are met:
- The debt must not be ‘excluded’. An excluded debt is defined in paragraph 4 (3), schedule 10 of the Corporate Insolvency and Governance Act 2020 as a debt in respect of any sum payable by a tenant under a business tenancy that is unpaid by reason of a financial effect of Coronavirus.
- The debt must be due for payment; it cannot be one that is payable in the future.
- The debt must be for £10,000.00 or more. However, if an individual creditor is owed less than this, they may present a joint petition with another creditor provided that the combined sum then amounts to £10,000.00 or more.
- A written notice must have been delivered by the creditor to the debtor (unless an order is obtained from the Court). It must confirm that the creditor is seeking the debtor’s proposals for payment of the debt and that the creditor intends to present a winding-up petition if the debtor has not made a satisfactory proposal within 21 days.
- The petition must state that all of the above conditions have been met and that either no proposals for payment of the debt were put forward by the debtor or, if they were, why they were unsatisfactory.
The new measures attempt to limit the number of companies being wound up by the Court but still take account of the financial implications of COVID-19. However, the new temporary restrictions are less limiting than the previous temporary measures.
If you would like further advice on the new temporary restrictions and ability to wind up an insolvent company, as either a creditor or a debtor, please contact our Dispute Resolution team.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
