Government publishes bill potentially temporarily restricting the use of winding-up petitions

On 20 May 2020 the government published draft insolvency legislation procedures for presenting winding up petitions and statutory demands in the Corporate Insolvency and Governance Bill. The Bill aims to provide more opportunities during and after the COVID 19 pandemic for companies survival. The UK government has proposed to ask Parliament to expedite the progression of the bill.

The provisions in the bill will apply to all the creditors and companies, However the provisions may be amended as the bill is debated in parliament.

We are leading experts specialising in insolvency proceedings. Our experienced City of London solicitors and barristers regularly assist companies facing a winding up petition; individuals served a statutory demand; or creditors owed money and considering issuing a winding up petition

Why will the government introduce this bill?

The Corporate Insolvency and Governance Bill will allow greater flexibly and breathing space for companies to explore options to recover.

Additionally, the new bill details provisions that may be of concern to landlords, tenants and property investors and intends to place wide-ranging restrictions on the use of statutory demands and winding up petitions. It will also temporarily suspend parts of insolvency law to support directors of businesses so that they can continue trading through and after COVID 19 without the threat of personal liability from aggressive creditor action.

The provisions in the Corporate Insolvency and Governance Bill will apply to all the creditors and companies. However the provisions may be amended as the bill is debated in parliament.

What fundamental reforms are included in the new bill and how will this effect winding up petitions?

The Corporate Insolvency and Governance Bill proposes that on presenting petitions in the period between 27 April 2020 and 30 June 2020 there may be a prohibition in the following circumstances:

  • If the creditor relies on non-payment during a statutory demand served between 1 March 2020 and 30 June 2020;
  • Where the petitioner depends upon the grounds in section 123(1)(a) to (e) of the Insolvency Act 1986, unless the petitioner has reasonable grounds for believing that COVID-19 has not had a financial effect on the company, or the facts relied upon as founding the petition would have arisen regardless (“the COVID-19 condition”);
  • If the petitioner relies on the ground that the company is not able to pay the debt as they fall due or unless the COVID 19 condition applies.

All winding up petitions must contain a statement where the petitioner considers that the where relevant the COVID 19 condition is met. Where applicable if petitions are presented on or after 27 April 2020 before the force of this legislation and if the COVID 19 condition is not met the Court may to restore the position make an order that would have been made even if the petition had not been presented.

How will the court make winding up orders?

The Court from 27 April 2020 onwards can make a winding up order if the pandemic has had a financial effect on the company before being presented with the petition if only the Court is satisfied. However, any winding up orders made after 27 April 2020 on the grounds that the company is not able to pay the debt is void that the Court could not have made the order had this legislation been in force.

Download the Corporate Insolvency and Governance Bill

When will the Bill apply?

The Corporate Insolvency and Governance Bill has its first reading in the House of Commons was on 20 May 2020 and a second reading is scheduled for 3 June 2020.

The new provisions will apply until 30 June 2020 or later to the date one month after the new bill becomes law as currently the second reading of the bill is timetabled for June 2020, however the provisions are likely to be extended.

On going petition? Need Legal Advice?

If your company is concerned about a winding-up petition or statutory demand from a creditor your company can potentially challenge that petition.

As a leading law firm with a track record of success, you can be assured that your matter is in safe hands. Our success rate is a result of the dedication of our lawyers who will diligently review your matter so it has the best possible chance of success from the outset when it matters the most.

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.

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