Legal News | 8.10.20
Corporate Insolvency and Governance Act 2020- Extension of Restricted Period
On 24 September 2020, the Government announced that the restricted period, during which creditors are unable to serve winding up petitions on debtor companies except in limited circumstances, has been extended until 31 December 2020. The restricted period had previously been due to expire on 30 September.
To re-cap, a creditor is unable to present a winding-up petition during the restricted period (i.e. until 31 December 2020) on a debtor company, unless it has reasonable grounds to believe that either COVID-19 has not had a financial impact on the debtor company or the company was unable to pay its debts irrespective of the financial effect of COVID-19.
The ban on using a statutory demand to present a winding-up petition on or after 27 April 2020 has also been extended to 31 December 2020. Statutory demands can still be served, provided they are not used with the intention of presenting a winding-up petition. However, service of a statutory demand without the threat of winding-up is likely be of limited value.
The restrictions on serving winding up petitions and statutory demands were set out in the Corporate Insolvency and Governance Act 2020 (the Act), which came into force on 27 June 2020 and was devised to give struggling businesses more flexibility as a result of economic problems caused by COVID-19.
With this extension now a reality, the Act has given debtor companies a longer opportunity to restructure their debts and remain trading during the pandemic, although it should be observed that the extension provides little comfort for creditors who may be struggling with their own cash flow and solvency problems.
If you would like more specific advice on the impact of the Corporate Insolvency and Governance Act on your business, or perhaps to discuss the implications of this extension, please get in touch with your usual contact or email: firstname.lastname@example.org.