Restrictions on winding up petitions as a result of COVID-19 to be modified from 30 September 2021 until 31 March 2022

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The current restrictions imposed on commercial landlords against using statutory demands and presenting winding up petitions are set to be replaced by a more targeted regime designed to help smaller companies.

The changes mean that from 30 September 2021 until 31 March 2022, businesses will be protected against winding up in respect of liabilities other than commercial rent.

In an effort to prevent creditors from demanding the repayment of smaller debts, the Government has also announced that legislation will be introduced to temporarily raise the current debt threshold for a winding up petition to £10,000 or more.

The proposed legislation will also require creditors to negotiate payment plans with debtor business, allowing a response period of 21 days before winding up action can proceed.

However, curbs on commercial landlords from presenting winding up petitions against limited companies relating to commercial rent arrears incurred during the pandemic will remain in place.

The measures introduced as result of the impact of COVID-19 on business activity were originally included in the Corporate Insolvency and Governance Act 2020 (CIGA).

Whilst this removes the total prohibition on winding up petitions, the proposals do still restrict a creditor’s ability to take action against a debtor. It is yet to be seen whether these proposals are just kicking the can down the road further, and storing up more problems for the future