The current provisions in the Corporate Insolvency & Governance Act 2020 (CIGA) which tightly restricted the use of winding up petitions during the initial phase of the Covid-19 pandemic were due to come to an end on 30 September 2020. However, the government announced yesterday that it would be exercising powers reserved under CIGA to extend the temporary provisions, as it has become increasingly clear that measures to combat the pandemic will be required for much longer than first anticipated in March.
Among other changes intended to provide ongoing support to Covid-19-affected businesses - which we will cover in a separate briefly shortly - statutory demands and winding up petitions will continue to be restricted until 31 December 2020, in line with the recently extended moratorium on commercial landlords’ rights to forfeit and to enforce under CRAR.
In the final instalment of our bitesize series, we review the tests applied to Covid-19 petitions, and look (a little further) ahead to the lifting of the restrictions for petitions presented from 1 January 2021 onwards.
A Practice Direction was introduced to outline the court’s approach to Covid-19 petitions which we outlined here.
In a handful of decisions during CIGA’s progression through Parliament and after it came into force, the ICC Judges confirmed that:
Appointments over companies wound up on a Covid-19 petition
In light of the above, insolvency practitioners considering taking an appointment as a liquidator over a company in compulsory liquidation should:
Presenting new petitions
As the months have progressed, there will inevitably have been pent-up demand from creditors who were unable to meet the threshold of the tests set out for Covid-19 petitions above – predominantly as so many businesses will have been adversely affected by Covid-19 – but whose debts remain unpaid by insolvent or intransigent debtor companies. Liabilities are only likely to increase by 31 December 2020, particularly with another rent quarter day falling due at Christmas.
From 1 January 2021 – unless the restrictions are extended further – creditors will be free to petition without the constraints of meeting the additional Covid-19 tests above. To ensure a newly presented petitions are effective, creditors should:
For further information on this article, please contact a member of our Restructuring & Insolvency Team.
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