Restrictions on the issuing of statutory demands and winding-up petitions are due to come to an end at the end of the month having first been implemented by the Corporate Insolvency and Governance Act 2020 (“CIGA”) in March 2020.
As of 1 April 2022, the restrictions will cease to apply and creditors will be free once again to issue winding-up petitions against debtors who are unable to pay sums owed.
Various restrictions have been in place since March 2020 with a view to protecting companies facing a winding up petition presented as a result of Coronavirus-related financial difficulties. These were partially lifted on 1 October 2021 (as below) however restrictions currently remain in place.
As outlined by Hannah Edwards previously, between 1 October 2021 and 31 March 2022, creditors were only able to present a winding-up petition provided the following conditions were met:
- The debt was a liquidated sum due and payable which did not relate to unpaid rent or other sums due under a commercial lease, unless the creditor could prove that non-payment was not related to the pandemic;
- The creditor had given the prescribed formal notice to the debtor of its intention to present a winding-up petition unless satisfactory payment proposals were received within 21 days (beginning on the date on which the notice was received);
- At the end of the 21-day period, the debtor had not made a proposal for payment of the debt that was to the creditor’s satisfaction; and
- The creditor was owed £10,000 or more, based on the debtor’s inability to pay its debts.
The Government’s intention in implementing such measures was to provide breathing space for small businesses, struggling with the impacts of the pandemic. However, as the economy returns to somewhat pre-pandemic conditions, the restrictions on winding-up petitions will soon cease to apply.
From 1 April 2022 all of the above restrictions will be lifted and creditors will be permitted once more to commence winding up proceedings within the remit of the provisions of the Insolvency Act 1986 save that the Commercial Rent (Coronavirus) Bill, which comes into force on or around 25 March 2022, has the effect of prohibiting a winding-up petition being presented against a business tenant where arrears of rent accrued during a period of forced closure as a result of the coronavirus pandemic. This moratorium is in place for a limited time only. The moratorium will last until the conclusion of arbitration or, if no reference to arbitration is made, 6 months after the Bill is passed. David Haines provides further insight here.
It is expected that there will be an influx of winding-up petitions from 1 April 2022 with creditors seeking to recoup money which could have been owing from as early as March 2020. Whilst this will be welcome news for creditors, small businesses will undoubtedly be concerned where there are debts of more than the threshold of £750 which remain unpaid and outstanding.