Winding up Petitions Easing From October 2021

During the COVID-19 pandemic we have reported on protections for companies in financial distress from creditor action since June 2020, as a result of the Corporate Insolvency and Governance Act 2020 (CIGA 2020).

In a recent Government announcement, the easing of these restrictions was confirmed. As of 1 October 2021, some companies shall no longer benefit from the protections. Although this may be some good news for some creditors who are owed substantial sums of money from company debtors, the announcement stated:

“New measures will be brought in to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up. This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.”

Therefore, until 31 March 2022, a creditor may still not be able to present a winding up petition against a debtor company, if either of the below apply:

  1. The debt is relatively small. Prior to the pandemic, a creditor could present a winding-up petition against a company if they were owed £750 or more. However, the temporary measures are likely to increase this threshold to £10,000 or more.
  2. A landlord who is owed contractual rent from its commercial tenant. This is not entirely unexpected, given that there is already a moratorium in place which prevents landlords from forfeiting commercial leases as a result of rental arrears until 31 March 2022.

Furthermore, the new temporary measures will require creditors to seek proposals for payment from a debtor company, giving them 21 days for a response before they can proceed with winding up action.

The statutory instrument that will introduce these temporary measures has not yet been published. We await with great interest to see the specifics and to establish exactly how it will impact creditors and the consequences it will have on debtor companies facing financial difficulties.

If you require further information on winding up petitions or to discuss a particular matter in further detail, feel free to get in touch with Adina-Leigh Collins or Bimal Kotecha, our insolvency experts. Alternatively, you can contact the Litigation department directly on 020 8858 6971.