Expiry of winding up restrictions
8th April, 2022
After a very long wait for creditors during a difficult economic period, the restrictions placed on Winding Up actions, introduced in response to the Covid-19 pandemic, have expired on 31 March 2022.
The position until 31 March 2022
The Corporate Insolvency and Governance Act 2020 (The Act), which became law on 26 June 2020, had a substantial impact upon creditors’ ability to recover debts from commercial debtors using insolvency. From 1 October 2021 interim measures were introduced to ease restrictions upon the ability to use Winding Up. These measures involved:
- An increased threshold for issuing Winding Up Petitions of £10,000 or more
- The need for a Schedule 10 notice which allowed debtors a 21 day period to provide proposals for payment before a creditor could present a petition.
Whilst the easing of restrictions were a step in the right direction it did little to assist creditors with debts under the financial threshold and prevented a swift recovery process.
Post 1 April 2022
The Insolvency Service announced that the restrictions will expire after 31 March 2022. This means that:
- Creditors are no longer required to serve a Schedule 10 notice before presenting a winding up petition
- The financial threshold for petitions returns to its pre-Covid level of £750.
Creditors should note that other restrictions on winding-up and bankruptcy petitions concerning COVID-related arrears of commercial rent continue to apply under the Commercial Rent (Coronavirus) Act 2022 and they should therefore proceed with care and seek advice.
The future of Winding Up
The expiry of the measures is a positive development for creditors. It will provide them with the much needed means to take early and robust action against companies, which is more essential than ever in the current economic climate.
The post-pandemic economic climate remains uncertain but creditors once again have extended options for debt recovery.
For further information and/or support in recovering debts due to you please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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