In the first lockdown the government introduced many measures to help struggling companies. One was protection against winding up petitions (a court process where a business that is owed money can shut down its debtor unless they pay what they owe).
This protection was intended to end in September 2020 but was extended, eventually ending on 30 September 2021.
New rules, which started in October 2021, still help financially weakened companies. But companies have less protection than before.
Here’s a summary of the new rules…
Landlords are still banned from using winding up petitions to force their business tenants to pay rent that is unpaid because of Covid-19. This runs with other temporary rules that stop commercial landlords from evicting non-paying tenants, because of Covid-19. These temporary rules should last until 31 March 2022.
Other creditors can use winding up petitions to put pressure on companies to pay debts (or to force them into liquidation, if they don’t pay). But:
- Only if they are owed £10,000 or more (a much larger figure than the pre-Covid-19 £750).
- They must give 21 days’ notice to the debtor and ask for payment proposals. They must not dismiss proposals casually; they will need a reason.
- In most cases they still need to serve a statutory demand on the debtor too (which gives them 21 days to pay). They can serve both documents at the same time. There is no need to wait for one to expire before sending the other to the debtor.
This is a step back towards ‘normal’. HMRC have used winding up petitions in the past, to collect unpaid VAT and PAYE contributions. It will be interesting to see what their policy is on the exercise of their newly restored legal rights.
01202 499255 | mniekirk@frettens.co.uk
This article is featured in the December issue of the Dorset Business Focus magazine. Read on the online version here.