New Insolvency Rules allow winding up petitions to be issued from 1 October 2021

By Wright Hassall LLP
schedule29th Sep 21

On 1st October 2021 a number of the temporary measures introduced by government to protect businesses from the financial effects of the coronavirus pandemic come to an end.  These include the end of the furlough scheme and the removal of the temporary restrictions on the issue of winding up petitions.

These changes are double edged depending upon whether you are a business juggling debt incurred during lockdown or a creditor seeking to recover money that has accrued due to you over the course of the pandemic.

Prior to 1 October 2021 temporary changes to insolvency legislation meant that a creditor could only issue a winding up petition if the court was satisfied that the debtor’s inability to pay was not as a result of the financial effects of the pandemic.  From 1st October 2021 that condition falls away for all debts except unpaid rent.  Under the new temporary rules applying from 1 October 2021 until 31 March 2022 a creditor may now issue a winding up petition if the following four conditions are satisfied.

Condition A

  1. The debt is liquidated (meaning the amount is fixed).
  2. The debt has fallen due for payment.
  3. The debt is not “excluded” (see below).

Condition B

The creditor has delivered a written notice to the debtor containing the following information.

  1. Identification details for the debtor company,
  2. The creditor’s name and address,
  3. The amount of the debt and the way it arises,
  4. The date of the notice,
  5. A statement that the creditor is seeking the debtor’s proposals for payment, and
  6. A statement that if no proposals are made to the creditor’s satisfaction within 21 days the creditor intends to issue a winding up petition.

The notice must be delivered to the company’s registered office or if this is not practical, to the company’s last known principle place of business or to an officer or manager of the company.

Condition C

At the end of the period of 21 days after the above notice was received by the debtor, the debtor has not made a proposal for payment which the creditor has accepted.

Condition D

The petition debt is £10,000 or more.

Excluded debts

An excluded debt is a debt in respect of rent or any sum or other payment that a tenant is liable to pay under a relevant business tenancy and which the debtor is unable to pay by reason of the financial effect or coronavirus. 

Therefore, landlords are still prevented from issuing a winding up petition in respect of rent accruing due during the pandemic if it is unpaid by reason of a financial effect of the pandemic.

Unpaid Rent

The moratorium on forfeiture of leases and seizure of goods in satisfaction of unpaid commercial rent has been extended until 25 March 2022.  Landlords and tenants are encouraged to try and reach an agreement in respect of arrears but where they fail to do so a binding arbitration process will be introduced.  However, this will only apply to rent accruing during periods where business premises were forced to close during the pandemic.  The draft legislation has not yet been published and is expected to come into force on or around 25 March 2022.

If you require advice in connection with the issue or defence of a winding up petition, or you require advice on the insolvency options available to your business please contact our team. 


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