Winding up petitions: what you need to know post-Covid
The Corporate Insolvency and Governance Act 2020 (CIGA 2020), which became law on the 26 June 2020, imposed restrictions on creditors seeking to recover debts, often through a winding up petition. On 31 March 2022, these restrictions ended and pre-Covid conditions resumed.
What is a winding up petition?
A winding up petition is a statement of intent by a creditor that states it is shutting down your business due to unpaid debts through the compulsory liquidation route. It’s the most formal and official course of action a creditor can take against a business and comes after the creditor has gone unnoticed when chasing debt and the business owner is seemingly unresponsive.
What is a winding up notice?
A winding up notice, also referred to as the notice of intention to appear, is the formal notice a creditor will lodge to register their intention to submit a winding up petition. The winding up notice is a formalisation of registering interest and supports the existing winding up petition – or can oppose it. Moore Kingston Smith’s business and recovery insolvency experts can provide advice and guidance for every stage of a winding up notice and petition.
The winding up notice rules from March 2022
As a result of the Insolvency Service lifting the restrictions brought about by the Act, creditors can present winding up petitions related to debts of £750 or more as opposed to the temporary threshold of £10,000 set in the pandemic. Creditors no longer need to serve a Section 10 Notice or provide a debtor company with 21 days to present a reasonable repayment proposal.
Instead, creditors may rely on a statutory demand that hasn’t been paid as evidence that a company can’t pay its debts. This is sufficient grounds for presenting a winding-up petition.
However, creditors who are landlords should note that other restrictions on winding-up and bankruptcy petitions concerning Covid-related arrears of commercial rent due to forced closure continue to apply. The applications fall under the Commercial Rent (Coronavirus) Act 2022, and landlords should proceed with care and seek specialist advice when dealing with these matters.
How to manage debt and creditors
The expiry of these restrictions will be welcomed by creditors who have not been able to take action. However, with the recovery of the economy uncertain, it remains to be seen how creditors will take advantage of the relaxed restrictions and whether small businesses will be able to cope. Whether you’re a sole practitioner, SME or international group, Moore Kingston Smith’s professional firms services can provide the auditing, accounting and strategic business advice needed to avoid financial issues.
If you have concerns about pursuing a debtor or about the debts your company owes, please get in touch to seek advice. Our insolvency practitioners have decades of experience and offer commercially savvy advice.