Today marks the first day that many creditors can consider issuing winding-up petitions against debtor companies since February 2020. The change in legislation signifies a significant step towards the return of pre-pandemic rules on winding-up petitions.
From 1 March 2020 to 30 September 2021, winding-up petitions could not be presented against a company based on a debtor’s inability to pay its debts, unless the creditor had reasonable grounds for believing that the pandemic had not had an effect the company’s ability to pay. This requirement was a high hurdle for creditors to overcome and deterred many from presenting winding-up petitions.
On 29 September 2021, new legislation was brought in which means that most creditors will not have to overcome this hurdle any longer. However, there are certain conditions that a creditor must satisfy before being able to issue a winding-up petition, which are explored below. The new provisions apply from 1 October 2021 to 31 March 2022.
Condition A – Not an “Excluded Debt”
First, the debt must be a liquidated sum that has fallen due. It also must not be an “excluded debt” i.e. a business tenancy debt that remains unpaid as a result of the Covid-19 pandemic.
Condition B – Notice
Before issuing a winding-up petition, the creditor must serve a written notice on the debtor which gives them 21 days from the date of service of the notice to put forward an acceptable proposal for payment of the debt.
Condition C – 21 Days
The creditor must wait 21 days from the date of the service of the notice without the debtor presenting an acceptable payment proposal before issuing the winding-up petition.
Condition D – Threshold of £10,000
The debt in question must be £10,000 or above, which is a marked increase from the previous £750 threshold.
For landlord creditors and creditors with debts of less than £10,000, it will be important to explore other debt recovery options – of which there are many.
If you are a creditor looking to issue a winding-up petition or to explore alternative debt recovery options, or a debtor who has received a notice or winding-up petition, you should seek legal advice to help you through the process so you can achieve the best outcome. Please get in touch with our expert insolvency team on 0845 287 0939 or contact us by email.
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