The Corporate Insolvency and Governance Bill 2019-21
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The Corporate Insolvency and Governance Bill 2019-21 was published on 20 May 2020. It provides for amendments to the Insolvency Act 1986 and the Companies Act 2006 on several areas of principal interest for those of us dealing with distressed companies - but what do we think about the amendments to the winding-up petition regime?
The provisions do not themselves have an expiry date. However, they concern the period between 1 March 2020 and 30 June 2020 (or one month after the Bill comes into force, whichever is later) ("the relevant period"). This period can be shortened or extended by up to six months by regulations (clause 39, the Bill).
Importantly no winding-up petitions can be presented on the basis of a statutory demand served during the relevant period. Petitions are also not able to be presented during that period on other evidence of an inability to pay debts unless the creditor has reasonable grounds for believing that the coronavirus has not had a financial effect on the company or that the debt issues would have arisen anyway.
So, where a petition presented between 27 April 2020 and the Bill coming into force was made without the creditor having the necessary reasonable belief grounds, the court is given power to make a remedial order to restore the parties to the position as if a petition had not been presented (paragraph 4, Schedule 10, the Bill).
Where the court disagrees with a petitioning creditor's assessment that coronavirus has not had a financial effect on the company, the court still has discretion to make a winding-up order if it is satisfied that the company's inability to pay its debts would have arisen anyway (paragraphs 5 and 6, Schedule 10, the Bill). This provision applies from 27 April 2020.
Have we seen anything so economically interventionalist by any other Government? Is it fair to creditors who may be facing their own financial pressures?
I was a trainee in the early 1990's and I do not recall seeing anything quite like it.
Whilst the legislation is expected to be fast-tracked through Parliament, is this another case of act in haste and repent at leisure? Time will tell!
For further information on the above, or any insolvency assistance, please contact us on 0207 467 3980 and speak to one of our insolvency law solicitors now. Alternatively, email us with your query at firstname.lastname@example.org and we will be sure to call you back at a time convenient for you. All communications will, of course, be dealt with in the strictest of confidence.