A new Insolvency Practice Direction (IPD) and an amendment to the Insolvency Proceedings Practice Direction 2018 has been approved and signed by the the Lord Chancellor, the Right Honourable Robert Buckland MP and Secretary of State for Justice and drafted by Mr Justice Zacaroli, chair of the Insolvency Rules Committee with the Chief Insolvency and Companies Court Judge, Judge Briggs, Mr Justice Snowden and Mr Justice Trower.
The IPD supplements the existing Insolvency Practice Direction and applies to all insolvency proceedings throughout the Business and Property Courts, subject to any variations outside London as directed by the relevant supervising judge.
What does the IPD deal with?
The Practice Direction and amendment to the Insolvency Proceedings Practice Direction has been introduced in response to the immediate COVID-19 pandemic and primarily deals with a range of measures for insolvency practice under the Corporate Insolvency and Governance Act 2020 (CIGA).
What is the ‘Coronavirus Test’?
CIGA 2020 has introduced a “Coronavirus Test” pursuant to which a creditor is not be able to present a winding up petition under section 124 of the Insolvency Act 1986 against a debtor company until 30 September 2020 on the grounds that it is unable to pay its debts unless the creditor has ‘reasonable grounds for believing that (a) coronavirus has not had a financial effect on the company, or (b) the facts by reference to which the relevant ground applies would have arisen even if coronavirus had not had a financial effect on the company’.
Initial Listing of the Petition
Paragraph 4.1 of the IPD: Upon presentation of a winding-up petition … the petition shall be listed for a non-attendance pretrial review with a time estimate of 15 minutes for the first available date after 28 days from the date of its presentation.
Paragraph 4.2: The purpose of the non-attendance pre-trial review is to enable the court to give directions for a preliminary hearing in order for the court to determine whether it is likely that it will be able to make an order under section 122(1)(f) or 221(5)(b) of the Insolvency Act 1986 having regard to the Coronavirus Test.
Petition to remain private
Pursuant to paragraph 5.1 of IPD: Until the court has concluded that it is likely that it will be able to make an order under section 122(1)(f) or 221(5)(b) of the 1986 Act having regard to the Coronavirus Test … the petition shall remain private, save for being served on the company and delivered to such other persons as are specified in Rule 7.9. Accordingly, unless the court otherwise orders:
(1) the petition (whether filed electronically or otherwise) shall be marked private and will not be available for inspection; and
(2) neither the petition nor the fact of its presentation shall be revealed in response to a search by a member of the public of any court file or other record.
What is a non-attendance pre-trial review?
As the name suggests, a non-attendance pre-trial review takes place at Court, however, the parties are not required to attend. The Court may either list the petition for a hearing at the non-attendance pre-trial review or alternatively, if the petition debt is disputed by the Company, the Court may list a preliminary hearing.
What is a preliminary hearing?
Pursuant to paragraph 8.1 of IPD, at the preliminary hearing:
(1) if the court is not satisfied that it is likely that it will be able to make an order under section 122(1)(f) or 221(5)(b) of the 1986 Act having regard to the coronavirus test, it shall dismiss the petition; or
(2) if the court is satisfied on the evidence before it that it is likely that it will be able to make an order under section 122(1)(f) or 221(5)(b) of the 1986 Act having regard to the coronavirus test it shall list the petition for a hearing in the winding-up list.
Filing of Evidence
If the petitioner wishes to rely upon any evidence at the preliminary hearing, other than that contained in the petition, it must file and serve on the company a witness statement containing such evidence at the same time as the petition. If the company wishes to rely upon any evidence at the preliminary hearing it must file and serve on the petitioner a witness statement containing such evidence within 14 days of service of the petition upon it.
Further directions are laid out by paragraph 6.3 of IPD, pursuant to which, the parties are required to file and serve a listing certificate stating (i) the identity of their legal representatives (if any); (ii) their availability for the preliminary hearing; and (iii) a time estimate for the preliminary hearing at least two days before the non-attendance pre-trial review.
Facing a winding up 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. For further details on how a company can obtain an injunction to restrain presentation of a winding-up petition, see our page here.
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