What’s changing with winding up petitions?
By Mr Bankruptcy
18th January 2022
The government has introduced a raft of measures during the covid pandemic to protect businesses, including a halt to winding-up petitions against viable businesses. From 1st October changes to winding up petitions came into effect, so what are the implications for businesses?
What restrictions were originally imposed during lockdown?
While the restrictions were in place, creditors were temporarily prevented from doing the following:
- Issuing a statutory demand, which could be served on companies owing more than £750
- Presenting winding up petitions when a business was unable to pay its debts because of the financial impact of the pandemic. This meant that creditors could only act if they believed Covid-19 had no financial impact on the business’s debts and they would not have been able to pay their debts even without the effect of the pandemic.
What has changed?
The changes to winding-up petitions that came into effect on 1st October have relaxed the restrictions and now creditors can serve a statutory demand to demonstrate that company’s insolvency due to its inability to pay its debts. They can also present a winding-up petition if a business fails to satisfy a statutory demand, but certain conditions are still in place:
- It’s not possible to file a winding up petition if the debt is unpaid rent or monies due under a lease of business premises and the payment has not been made due to the financial effect of Covid-19.
- The debt for which the petition is made must be £10,000 or more.
- A creditor must give notice to the business, detailing specific information, that it intends to present a winding-up petition within 21 days, if there have been no proposals made for paying the debt with which the creditor is satisfied.
These new restriction on winding-up petitions will remain in place until 31st March this year.
What does this change mean for debtors?
For outstanding debts of more than £10,000, creditors do not now need to show that the pandemic did not have a financial impact on the debtor. So, if the criteria above are met, even if the pandemic is stated as the reason for not repaying the debts, the creditor can proceed with presenting the winding-up petition.
This relaxation of restrictions means that it is more important than ever to start engaging with creditors to reach arrangements for repaying debts and, where necessary, to seek expert advice on preventing the commencement of a winding-up petition.
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