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Winding-Up Petitions & Statutory Demands effective from 1 October 2021

Winding-Up Petitions & Statutory Demands effective from 1 October 2021

Is your bad debtor list shielded by these updated restrictions?

The Government has recently announced that restrictions on Statutory Demands and Winding-up Petitions under the Corporate Insolvency & Governance Act 2020 (CIGA 2020), which are scheduled to expire on 30 September 2021, will not be extended.

Instead they will be replaced by fresh restrictions for Winding-Up Petitions presented between 1 October 2021 and 31 March 2022.

This represents a further 6 month period where the usual rules for Statutory Demands and Winding-Up Petitions are adjusted - to allow breathing space for businesses in recovery from the financial effects of the coronavirus pandemic.

The new restrictions applicable from 1 October 2021 include the following:-

  • A creditor cannot present a Winding-Up Petition in respect of commercial rent which is unpaid because of the financial effects of the coronavirus pandemic. Commercial tenants who find themselves unable to pay their rent due to the effects of the pandemic are also protected against forfeiture of their leases.
  • Previously, company Statutory Demands could be presented for debts of over £750. The general threshold for Winding-Up Petitions against limited companies has risen from £750 to £10,000. This is applicable to all debts or debt.
  • Subject to an application to the Court for an Order dispensing with the need to do so, a creditor now has to send a written notice under Schedule 10 of the regulations to the debtor seeking the debtor's proposals for payment of the debt and allow 21 days before issuing their Winding-Up Petition, in the absence of satisfactory proposals for repayment of the debt. This notice is different to a Statutory Demand.
  • A creditor can still rely on non-payment of a Statutory Demand to evidence a debtor's inability to pay their debts subject to the other conditions set out above.

Many companies pursuing debt recovery have found a Statutory Demand to be very effective, particularly when money is owed by large corporations which sometimes erect various administrative barriers to payment debts to smaller businesses. For example, we served one recently and before our process server had returned from Gloucester to Bristol, the multinational debtor company had been in contact to make urgent arrangements to pay our SME client.

The minimum level of debt for a Winding-Up Order increasing from £750 to £10,000 will affect smaller companies for whom the upper end of that scale is still a large amount of money. The addition of statutory Late Payment interest and compensation is usually worth doing.

Because of these restrictions creditors may prefer to use the County Court - a County Court judgment can of course be enforced in a variety of ways.

If Wards Solicitors can help your business with debt recovery, please get in touch with Partner James Taylor on 01454 204880 or one of our Disputes team on 0117 929 2811.

Our Disputes Team will be pleased to help you recover as much as possible of your business' bad debtor ledger.

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