The Government has announced that the temporary restrictions on winding-up petitions found in Schedule 10 of the Corporate Insolvency and Governance Act 2020 (CIGA 2020) will be phased out from 1 October 2021.
Creditors have been unable to pursue Companies in financial distress as a result of the pandemic since June 2020. The restrictions on creditor actions will now be lifted as the economy returns to normal trading conditions. It will no longer be necessary to consider the financial effect of the pandemic on the Company as the restrictions have been eased.
However, new measures will be in place from 1 October 2021 until 31 March 2022 as follows:
- The current debt threshold to issue a winding-up petition against a Company has been increased from £750.00 to £10,000.00 or more; and
- Creditors are required to seek proposals for payment from a debtor business, giving them 21 days for a response before proceeding with a winding-up Petition.
The Government has stated that it wishes to protect smaller businesses who are rebuilding their balance sheets and commercial landlords with rent arrears which accrued during the pandemic. Commercial tenants will continue to be protected from eviction until 31 March 2022, whilst the Government implements a rent arbitration scheme to deal with commercial rent arrears during the pandemic.
Although, the financial threshold has been increased and the restriction for debt incurred directly as a result of the pandemic, creditors will now be able to issue Winding Up Petitions subject to the temporary criteria set out above.
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