Use of statutory demand to make company insolvent suspended until June
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In a recent blog we highlighted the further extension to the temporary restrictions on a Landlord's ability to forfeit a commercial lease and utilise CRAR to pursue a tenant for unpaid rent until 30 June 2021. The Government has also now extended, until 30 June 2021, the temporary restrictions introduced under the Corporate Insolvency and Governance Act 2020 relating to winding up petitions and statutory demands. These changes were introduced by the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (SI 2021/375) which include other changes, too.
The effect of the extension is to prevent a landlord (or any other creditor) presenting a winding up petition against a company that is based on a statutory demand served between 1 March 2020 and 30 June 2021. Further, no winding up petition may be presented (at court) between those dates, based on the company's inability to pays its debts, unless either (1) there are reasonable grounds for believing that COVID-19 has not had a financial effect on the company, or (2) the company would have become unable to pay its debts even if Covid-19 had not an effect on the finances of the company. The Court cannot make a winding-up order on winding-up petitions unless it is satisfied these requirements are met.
It is still technically possible to serve a statutory demand, but it will not have the same effect and nor will the debtor perceive it to be the threat it once was. Instead, a simple letter can be sent to the debtor demanding payment in the first instance, and the legal options can be considered later.
Do remember that these restrictions only apply to companies; if your debtor is an individual, then the usual process will apply which requires the service of a statutory demand before a creditor can present a bankruptcy petition.
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Issuing a Bankruptcy or Winding-up Petition
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Cheraine Williams
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