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Government Relaxes Restrictions on the Use of Statutory Demands and Winding-Up Petitions

On 9 September 2021, the government announced that it will begin the process of withdrawing its legislative support of businesses facing financial difficulties as a result of the coronavirus pandemic.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 will take effect on 29 September 2021. These Regulations will lift the current measures introduced at the outset of the pandemic relating to the presentation of statutory demands and winding up petitions where debts were accruing as a result of the economic effects of the pandemic.

The Regulations

The new Regulations, which will apply in a ‘relevant period’ currently due to expire on 31 March 2022, say that:-

  • Creditors cannot present winding up petitions for commercial rent that is unpaid as a result of the financial effect of the coronavirus pandemic.
  • Creditors cannot present winding up petitions for debts worth up to £10,000.00
  • A creditor must issue a ‘Schedule 10 Notice’ seeking the debtor’s proposals for payment of the debt prior to presenting a petition. The creditor may then present a petition after 21 days if the debtor has not put forward a proposal to the creditor’s satisfaction.
    • –  A creditor can apply to the court for permission not to serve a Schedule 10 Notice to to give the requisite 21 days to make a proposal but the guidance on how successful such an application will be is not clear.
  • Creditors can, once again, rely on an unsatisfied statutory demand as evidence of a debtor’s inability to pay its debts as and when they fall due. 

Comment

By temporarily increasing the limit for the presentation of winding up petitions from £750.00 to £10,000.00, the new Regulations seek to strike a balance between the need for creditors to be paid and the need to protect otherwise viable businesses from insolvency action where the debt is relatively small.

Commercial landlords will feel short-changed by the Regulations because it remains prohibited to serve statutory demands and winding up petitions for commercial rent accrued during the pandemic, curtailing their range of available remedies to recover unpaid rent.

Formal action is sometimes unavoidable but, in most cases, creditors and debtors alike will be wise to seek an agreement as to the repayment of commercial debts as early as possible in order to save the additional stress and cash strain that a dispute can bring. The Schedule 10 Notice requirement encourages this conciliatory approach.

Contact our dispute resolution team on 01228 552600 or 01524 548494 for advice as to how to manage and resolve disputes regarding commercial debts. We can also assist in respect of rent arrears disputes outside of the winding up framework.

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