Reed Smith Client Alerts

There have been two recent changes to the insolvency laws in England and Wales relating to winding up petitions1 and Part 1A moratoriums.

Authors: Kathleen Garrett Colin Cochrane Geraint Biggs

Winding up petitions – Relaxation of restrictions

A relaxation of restrictions on the ability to present winding up petitions-come into effect on 1 October 2021 and will only affect petitions presented on or after 1 October 2021. The remaining restrictions – a key focus of which prevents winding up petitions in respect of arrears of rent under a business tenancy –  are envisaged to be in force until 31 March 2022.

The new rules remove the coronavirus protections altogether, save as described below, to reflect the gradual return to normal trading conditions. With effect from 1 October 2021, a winding up petition may only be presented by a creditor on the grounds that a company is unable to pay its debts if four conditions are met:

  1. Liquidated Sum/Non Business Rent: the debt owed by the company is: (a) a liquidated amount that has fallen due for payment and (b) does not relate to non-payment of rent under a business tenancy
  2. Formal Request for Proposals: the creditor has made a formal request to the company seeking proposals for the payment of the debt
  3. No Proposals within 21 days: the company has not made a proposal that is to the creditor’s satisfaction within 21 days of the formal request
  4. £10,000 debt threshold: the debt (or the total of the debts if there are more than one) amounts to at least £10,000
A creditor can apply to the court to disapply conditions 2 and 3 above or to vary condition 3.