Under the current regime,² creditors are greatly restricted in their ability to present petitions for the winding up of companies. Creditors are currently only able to petition for the winding up of companies where: (a)  the company has not been financially affected by coronavirus or (b) the grounds for the petition would have arisen regardless of the coronavirus.

We anticipate that there will be a significant increase in the number of winding up petitions presented over the next quarter. As a reminder, often a 21 day statutory demand is used to establish insolvency for purposes of such petitions. Creditors should ensure that a debt included in a statutory demand is (1) for a liquidated sum; (2) in respect of a debt that is due and owing; and (3) not genuinely disputed by the debtor on substantial grounds.

Part 1A moratoriums

As with the above, changes³ to the rules governing the Part 1A moratoriums come into effect on 1 October 2021, so they only apply to any moratorium that came into force on or after 1 October 2021.

The changes include:

1. Content and time periods prescribed – Setting out detailed procedures for the conduct of the moratorium, including prescribing the content and time periods relating to certain notifications required to be given in connection with the moratorium.
2. Scope of disregarded debts widened – For the purposes of deciding whether to bring a moratorium to an end under s.A38(1)(d), the scope of debts to be disregarded by the monitor has been widened. The monitor must now disregard debts they have reasonable grounds for thinking are likely to be compounded to the satisfaction of the creditor within five business days of any such decision, in addition to the existing requirements to disregard debts that are likely be paid within five days and debts deferred past the date of decision.
3. Notice periods are now given in business days rather than simply days – Overwhelmingly the number of days has simply been changed to the same number of business days (apart from, that is, A17(1) notices regarding changes in the end of moratoriums, which have changed from needing to be delivered in five days to three business days).
4. Repayment of interest on fees – Courts are now explicitly permitted to order a monitor to repay interest on some or all of its remuneration in the context of any application by a liquidator or administrator that the remuneration charged by the monitor in relation to a moratorium was excessive.

1. Updated by The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021, published on 10 September 2021.
2. Amended by the Corporate Insolvency and Governance Act 2020 in order to enhance protections for companies in financial distress as a result of the COVID-19 pandemic.
3. Contained in The Insolvency (England and Wales)(No.2)(Amendment) Rules 2021.

Client Alert 2021-250