The restrictions on statutory demands and winding-up petitions introduced in response to the pandemic will not be extended when they expire on 30 September 2021.

Instead, they will be replaced with more limited restrictions for winding-up petitions presented between 1 October 2021 and 31 March 2022 providing a six-month period for the temporary insolvency measures to be phased out.

The revised arrangements lift the current restrictions on statutory demands but impose new requirements for winding-up petitions.

In essence the new schedule means that for winding-up petitions presented between 1 October 2021 and 31 March 2022:

  • A creditor may not present a winding-up petition if it is for a debt or debts totalling less than £10,000. The threshold is usually £750, however, the increase to £10,000 is designed to give smaller businesses the opportunity to get back on their feet and rebuild their balance sheets. Although, this could backfire for smaller businesses who hoped to proceed with winding-up petitions to collect overdue debts by limiting their debt collection options and ability to recover monies owed to them.
  • 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 moratorium on forfeiture for commercial tenants that was extended earlier this year to 31 March 2022. The wording which is contained in the statutory instrument, will no doubt be of great interest to commercial landlords and tenants, particularly in relation to whether a back door may be opened to commercial forfeiture for landlords with tenants who owe non-rent debts in excess of £10,000.
  • A creditor may not present a winding-up petition unless written notice (a Schedule 10 Notice) has been delivered to the debtor seeking the company’s proposals for payment of the debt and the company has not made a proposal that is to the creditor’s satisfaction within 21 days. A creditor may, however, apply to court for an order that they do not need to deliver a Schedule 10 Notice or give the debtor 21 days to make a satisfactory proposal.
  • 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.

It has been widely publicised and discussed at length in the insolvency and restructuring sector that there has been an ever-growing mountain of debt which has accumulated during the pandemic, as creditors have been unable to seek the class remedy of petitioning for the court to place debtor companies into compulsory liquidation.

This has also meant a significant number of so called ‘zombie companies’ have been able to continue to trade whilst insolvent. We therefore expect to see a considerable volume of winding-up petitions being presented in the coming months.

If you require advice on any debt recovery matter, please don’t hesitate to get in touch by emailing debtrecovery@beswicks.com or phoning 01782 205000.