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Government extends ban on winding up petitions to 30 June 2021

View profile for Julie Hunter
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As expected, the government has further extended the temporary protections given to companies by the Corporate Insolvency & Governance Act 2020, by extending the moratorium on serving statutory demands and presenting winding up petitions to 30 June 2021.

As we reported in our blog last September, measures intended to support otherwise viable businesses during the current crisis were put in place last year in an attempt to protect those businesses from insolvency arsing solely due to trading losses during the pandemic.

The ban on serving statutory demands and presenting winding up petitions against companies was due to expire on 31 March 2021 but has been extended again to 30 June 2021, when it is anticipated all restrictions imposed due to the pandemic will be lifted.

The aim of this legislation is to provide companies with breathing space to help them survive and to avoid what would otherwise be a raft of insolvencies.The extension should allow companies time to reach agreements with their creditors to pay debts over time, once full trading resumes.

Note, however, that the ban on statutory demands and winding up petitions only applies to companies which cannot pay their debts due to Covid-19. If there is another reason for non-payment of an undisputed debt, the court will allow a winding up petition to proceed.

In addition, the suspension of wrongful trading rules: removing the threat of personal responsibility for wrongful trading for directors has been revived to give this relief for the trading period between 26 November 2020 and 30 June 2021. Directors should bear in mind that all other checks and balances on directors, and their statutory duties, remain in place.

It is hoped these measures will allow companies the time and space to avoid the worst case scenario arising from the pandemic, from a business view point. Should any business owner or director need help and advice on problems arising during the current crisis, our commercial solicitors are available to assist.