It is clear that the coronavirus pandemic has had an impact on the court’s ability to hear winding up petition hearings in the usual way. A significant number of winding-up petitions have been adjourned by the court in recent weeks.
To help companies and individuals with the economic crisis caused by the coronavirus pandemic the government is pushing to amend insolvency laws. The UK government recently announced that it will fast-track the 2018 moratorium proposal to allow solvent companies a period of time (of initially 28 days) in which creditors are not able to take action against them.
However, creditors can still present a winding up petition following the Lord Chancellor, the Right Honourable Robert Buckland MP, Secretary of State for Justice, approving and signing a temporary Insolvency Practice Direction (IPD) which came into force on 6 April 2020.
Is it possible to wind up a company during the Covid-19 pandemic?
In the current climate, yes, winding-up petitions can still be issued. The Court has put a plan in place for dealing with winding up petitions over the coming months. In this unprecedented time, (especially with the government allowing time for creditors to repay debts) extra thought may be required as to whether a petition against a particular company is likely to achieve the petitioner’s goals.
Especially now, any company or individual contemplating a winding up petition for unpaid debts or an overdue invoice should seek legal advice (now more than ever) to avoid the costs consequences of prematurely commencing legal proceedings.
What is the Temporary Insolvency Practice Direction?
Its purposes are to assist court users during the current COVID-19 pandemic by avoiding the need for parties to attend court in person, and to deal with some of the problems arising from the need for the court(s) to operate with limited staff and resources. It supplements the Practice Direction – Insolvency Proceedings July 2018 and applies to all insolvency proceedings in the Business and Property Courts subject to variations outside London as directed by the relevant supervising judge. Company work will be dealt with in a comparable way, and all adjourned hearings will be relisted within six weeks.
Does the Temporary Insolvency Practice Direction mean that winding up petition hearings will go ahead?
Yes, to a certain extent.
Guidance states that this Insolvency Practice Direction has been introduced to provide workable solutions for court users during the current COVID-19 pandemic. Its intention is to avoid, so far as possible, the need for parties to attend court in person and to take into account the likelihood of the Court needing to operate with limited staff and resources. It also provides users with guidance as to the type of hearings which the Insolvency and Companies Court list will endeavour to provide during the period for which this practice direction is in force.
Download the Temporary Insolvency Practice Direction
Which hearings are deemed urgent to be heard?
Chief ICC Judge Briggs has produced a guidance note to be read alongside the Temporary PD (“London Guidance Note”) which applies to work listed before an ICCJ. The London Guidance Note sets out a list of hearings which will be deemed urgent in the BPC, being:
- applications made pursuant to section 17 of the Company Directors’ Disqualification Act 1986;
- applications made pursuant to section 216 (restriction on re-use of company names) of the Insolvency Act 1986;
- public interest winding-up petitions;
- applications to convene a meeting for members’ scheme of arrangement;
- capital reduction claims; and
- cross-border merger claims.
It is not clear at this stage whether the above list is exhaustive, and the court intends to continue to list non-urgent business where possible and based on availability. Non-urgent applications and claims that have been adjourned are intended to be listed within 6 weeks from 21 April 2020. Notwithstanding that, we would still expect the court to receive a number of applications from applicants who might well consider that their proceedings should qualify for an urgent hearing.
Download the London Practice Note
Specialist London Winding-up Petition Lawyers
We’re masters of insolvency dispute litigation. We are a specialist City of London law firm made up of Solicitors & Barristers. We’re based in the Middle Temple Inns of Court (next to the Royal Courts of Justice where the High Court and Central London County Courts are based). We’re experts in dealing with matters surrounding insolvency in particular our team have unparalleled experience at both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.