The Corporate Insolvency and Governance Act 2020 (CIGA) introduced restrictions on winding up petitions and statutory demands and set an expiry date of 30 September 2021 for these temporary measures.
On 1 October 2021 the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 was enacted with the objective of rebooting the regime in a structured and debtor conscious way. The amended schedule 10 increased the debt threshold for winding up petitions from £750 to £10,000 and required creditors to issue a notice to debtors under schedule 10 seeking their proposal for repayment within 21 days before a winding up petition could be presented. The amendments were set to expire on 31 March 2022.
Present
On 28 March 2022 the Insolvency Service issued a statement that the insolvency regime will return to its pre-pandemic operation and that there will be no further extension to the restrictions.
Future
From 1 April 2022, creditors will once again be able to issue a winding up petition for debts of £750 or more once a demand for payment has been made and not satisfied. Demand can be made either by way of letter or a statutory demand There is no longer a requirement to issue a notice to debtors seeking their proposals for repayment within 21 days before a winding up petition can be presented.
Landlords
It is important to note that winding up petitions based on rent arrears accumulated during the pandemic remain under restriction. The Commercial Rent (Coronavirus) Act 2022 received Royal Assent on 24 March 2022 which ringfences certain ‘protected’ pandemic rent arrears. If the landlord and tenant cannot reach agreement on the repayment of the ringfenced debt they can refer the matter to a newly established, Secretary of State approved arbitration scheme which will make a binding award to resolve the matter.
Conclusion
Once the restrictions have been lifted, creditors will be empowered to pursue smaller debts they have not been able to pursue since the pandemic began.
Companies need to be aware of the risk that this presents and should review their creditors list in light of these changes.
Should you require any assistance with issuing a demand or a winding up petition or if you are concerned about the financial health of your company (and the impact this may have on you personally) please do not hesitate to contact a member of our Insolvency Team.
