Restrictions on statutory demands and winding up petitions extended by 3 months to 31 December 2020

Landlords and other creditors are now unable to rely on a statutory demand served between 1 March 2020 and 31 December 2020 to bring a winding up petition against a company.

Schedule 10 of the Corporate Insolvency and Governance Act 2020 made it impossible for a winding up petition to be brought in reliance upon a statutory demand served between 1 March 2020 and 30 September 2020. This restriction has been extended by a further three months by the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020, and, importantly, now applies even if Coronavirus has had no impact on the debtor.

This means that there is very little point in a creditor serving a statutory demand before 1 January 2021.

In addition, until at least 31 December 2020 a winding up petition cannot be brought based on a company’s inability to pay its debts, unless the creditor has reasonable grounds for believing that coronavirus has not had a financial effect on the company, and can demonstrate that the circumstances would have arisen even if coronavirus had not had a financial effect on the company.

The extension of these restrictions will come as a further blow to commercial landlords, who have been unable to take action to recover outstanding rent for 6 months. Add in the amendments to commercial rent arrears recovery (CRAR), which now require 276 days’ rent to be outstanding before the procedure can be used. It is easy to see why commercial landlords are wondering how exactly they will be able to recover the money owed to them, particularly if their tenants fail to pay the further rent due on today’s quarter day.

We will continue to monitor the situation. If you have any queries about this topic, please contact Joanna Osborne or any member of the Property Litigation team.

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