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Lawbite: Restrictions on winding-up and statutory demands extended

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate litigation - LawBite

26-03-2021

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

The Government has extended the temporary restrictions on issuing winding-up petitions and statutory demands from 31 March 2021 to 30 June 2021

The restrictions, originally set out in the Corporate Insolvency and Governance Act 2020, mean that:

  • winding-up petitions cannot be presented based on statutory demands issued between 1 March 2020 and 30 June 2021, and,
  • winding-up petitions presented on other grounds between 27 April 2020 and 30 June 2021 can only succeed if the creditor can show that COVID has not had a financial effect on the debtor or the winding-up ground would have applied even if COVID had not had an effect on the debtor (the “COVID Test”).

The above measures have historically been helpful tools for landlords of commercial premises to prompt payment of arrears.  If payment was not received following service of a statutory demand, the threat of the petition being advertised alone was frequently sufficient to prompt tenants to pay.  The extension of these restrictions, coupled with the fact that winding up petitions will remain private unless and until a judge has decided the COVID Test (Insolvency Practice Direction relating to Corporate Insolvency and Governance Act 2020) may come as a further blow to landlords.  

The restrictions only apply to corporate debtors and not individuals. 

Key points

  • this extension follows the recent extension to the forfeiture moratorium and the restriction on landlords’ abilities to use the Commercial Rent Arrears Recovery (CRAR) scheme for enforcement was extended.  Both of these temporary restrictions were extended to 30 June 2021 (see our Lawbite on these developments here)
  • there are not many reported cases as yet which look at the Coronavirus Test in winding-up petitions but the case  Newman v Templar Corp Ltd [2020] EWHC 3740 (Ch) demonstrates that it is a high but not insurmountable hurdle to overcome