Top Tip: Concurrent service of Statutory Demands and Schedule 10 Notices

From 1 October 2021 until 31 March 2022, in a partial lifting of the temporary restrictions on the use of statutory demands and winding-up petitions, petitions based on a debtor’s inability to pay its debts can again be presented regardless of the financial effect on the debtor of coronavirus, provided the conditions set out in paragraph 1 of the new Schedule 10 to the Corporate Insolvency and Governance Act 2020 (CIGA 2020) (Schedule 10) are met. The creditor must still establish that the debtor is unable to pay its debts as provided for by section 123 of the Insolvency Act 1986, but may now again rely on an unpaid statutory demand to do so.

In summary the conditions that must be met under paragraph 1 of Schedule 10 are:

1. A creditor may not present a winding-up petition in respect of excluded debt. Excluded debt is defined as debt in respect of any sum payable by a tenant under a business tenancy that is unpaid by reason of a financial effect of coronavirus. This provision supports the extended moratorium on forfeiture for commercial tenants.
2. The creditor must be owed a debt by the company or other entity such as an LLP that is both for a liquidated amount and due for payment.
3. A creditor may not present a winding-up petition if it is for a debt or debts totalling less than £10,000.
4. A creditor may not present a winding-up petition unless written notice (a Schedule 10 Notice) has been delivered to the debtor.

A creditor may, however, apply to court for an order that it does not need to deliver a Schedule 10 Notice or give the debtor 21 days to make a satisfactory proposal.

The Schedule 10 Notice must contain statements that:

• The creditor is seeking the debtor’s proposals for payment of the debt.
• If the debtor has not made a proposal that is to the creditor’s satisfaction within 21 days, the creditor intends to present a winding-up petition.

The Schedule 10 Notice must also contain the following:

• Identification details for the debtor.
• The name and address of the creditor.
• The amount of the debt and the way in which it arises.
• The date of the notice.

The Schedule 10 Notice must be delivered in one of the following ways:

• To the company’s registered office.
• If delivery to the company’s registered office is not practicable or the company has no registered office, to the company’s last known principal place of business, or to the secretary, or a director, manager or (in relation to an unregistered company) principal officer of the company.

While Schedule 10 to CIGA 2020 sets out the information and statements that a Schedule 10 Notice must contain, it does not prescribe the form. To assist practitioners, Practical Law Restructuring and Insolvency has created a form of written notice, which complies with paragraph 1 of Schedule 10 to CIGA 2020. If it is preferred, the Schedule 10 Notice may take the form of a letter provided it contains the required content and is delivered in the required manner.

Where the creditor relies on non-payment of a statutory demand to establish the debtor’s inability to pay its debts, the Schedule 10 Notice may be, but is not required to be, served at the same time as the demand. However, creditors and their advisors would be well advised to serve the statutory demand and the Schedule 10 Notice at the same time, preferably by process server, so that the 21 days run concurrently.

The form of the winding up petition has also been amended. The creditor’s winding-up petition will need to include statements that:

1. The requirements of paragraph 1 of Schedule 10 have been met.
2. Either that no proposals for payment of the debt were made, or a summary of the reasons why the proposals made were not to the creditor’s satisfaction.

If you have questions about the new procedure please contact one of our Restructuring & Insolvency team here at Edwin Coe LLP.

 

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