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Coronavirus Debt Enforcement for Companies Update

Sep 28, 2021

The embargo on evicting or winding up companies who have failed to pay their commercial rent has been in place for a while; was extended from 30 June 2021 and remains in place until 25 March 2022.

The exception was if the creditor could show the failure to pay the rent was not COVID related but the few Court decisions made under the emergency legislation made it clear that the exception was an extremely high hurdle to clear.

However, if the debt is not commercial rent arrears, the emergency ban on issuing Winding Up Petitions will end on 30 September 2021 and to mitigate the position; there will be some new provisions, again of a temporary nature; which creditors will have to follow.

  1. The minimum debt before a Winding Up Petition can be commenced will be £10,000 (up from £5,000).
  2. Creditors must first make contact with the debtor company and ask for proposals as to how they intend to settle the debt and give the debtor 21 days to respond.

Many creditors will have put off serving Statutory Demands because the next step of issuing a Winding Up Petition was impossible. Others will have issued money claims for the debt and have Judgements that they have chosen not to enforce for the time being.

Creditors still have to make difficult decisions as to whether the expense of the Winding Up process is worth it for a debtor company that clearly has a large number of debts. The fact you are the creditor issuing the Winding Up Petition does not give you any priority over other creditors.

It does at least give creditors more control over debts owed by those companies who have perhaps taken an unfair advantage of the emergency legislation, in circumstances where they have continued to trade reasonably effectively over the last 12-18 months.

Our Dispute Resolution Team will continue to provide updates and can be contacted on DRTeam@herrington-carmichael.com or 01276 686222.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

Frankie Tierney

Frankie Tierney

Partner, Disputes and Claims

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