Since June 2020, we have seen a temporary halt of issuing winding up petitions (WUPs) without certain conditions being met.
Most recently, those coronavirus-related restrictions meant that a creditor could issue a WUP for an undisputed debt above the increased threshold of £10,000 (normally £750) provided that the additional conditions set out in Schedule 10 to the Corporate Insolvency and Governance Act 2020 were met. These were:
- A creditor could not present a winding-up petition in respect of excluded debt, which was 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.
- A creditor could not present a winding-up petition unless written notice (a Schedule 10 Notice) had been delivered to the debtor confirming that the requirements of Schedule 10 have been met, and 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.
However, these rules no longer apply from 31 March 2022. What does this mean for you?
The new rules
Commercial landlords are no longer prevented from issuing a WUP in respect of unpaid rent which has accrued due to the economic effect of the coronavirus pandemic. So, commercial tenants will no longer be protected from eviction. However, the Government have proposed to implement a rent arbitration scheme to deal with commercial debts which accumulated during the coronavirus pandemic.
Creditors who are owed less than £10,000 are once again able to present WUPs – the old threshold of £750 is back. This means that debtors who owe sums less than £10,000 can once again be on the receiving end of WUPs – and so need to be on the lookout for them, and making sure that all debts are settled on time (or arrangements reached if for any reason they can’t be).
Debtors previously had the opportunity to make proposals for payment (albeit not necessarily actual payment!) and introduce prospects of resolving the debt within 21 days of receiving notice before a WUP could be formally presented. However, the rules are now reverting to pre-coronavirus times where it is not required to give notice of a WUP – so debtors could receive one at any time!
Beware of the WUP
It is expected that WUPs will become more prevalent now the Schedule 10 Conditions have been lifted. For the first time in around 2 years, creditors are able to issue WUPs for undisputed debts without any restrictions other than the relatively modest £750 threshold.
If you’re owed money they can be a very useful means of recovery. But if you’re a debtor, as we’ve discussed previously, you must act quickly if you are presented with a WUP, not only due to the detrimental effect it can have on the day to day running of your business, but also due to the risk of other creditors joining the WUP, increasing the creditors you must pay.
The removal of the remaining restrictions will be a shock to the system. So, if you are on either side of the fence, requiring advice in connection with the issue or defence of a WUP, get in touch.
This article is from May 2022’s edition of Aggregate. To read the complete newsletter as a PDF click here.