Debt recovery and winding-up processes look set to return to something like normal from the end of the year, after major changes were made to the regimes through lockdown and during the pandemic.
On 23 April 2020, the government announced temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the pandemic.
Statutory demands and winding up petitions issued to commercial tenants were temporarily voided and changes made to the use of Commercial Rent Arrears Recovery (CRAR) – the government essentially asked landlords and investors to work collaboratively with high street businesses unable to pay their bills during Covid-19 to reach agreements on debt obligations.
The government temporarily banned the use of statutory demands made between 1 March 2020 and 30 September 2020. They also stopped any winding up petitions presented from Monday 27 April through to 30 September.
The measures were initially due to be in place until 30 September 2020 but were extended by The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (CIGA) to apply until 31 December 2020.
When will statutory demands have effect again?
Statutory demands could still be served throughout the period on the premise they were not used for presenting a winding-up petition – but without the threat of a winding-up petition they appeared to be of little use.
Beginning on 1 January 2021, assuming that there is no extension to the end date by the government, the service of statutory demands will return to normal, when we would expect to see creditors go back to demands as a means to recover debts.
When can a winding up petition be made?
During the period 27 April to 31 December, winding up orders which would not have been made if the legislation had already come into force, are rendered void.
Where a petition is presented in this period, but the court determines the coronavirus had a financial effect on the company before presentation of the petition, a winding-up order will be prohibited from being made. The bar has been set very low for proof of financial effect, so it will be difficult to prove a debtor had not been financially affected by the pandemic.
Just as with statutory demands, the normal procedure regarding winding up petitions will return on 1 January 2021, if there is no extension by the government.