Use of statutory demand to make company insolvent suspended until June

08 Apr 2021

In a recent blog we highlighted the further extension to the temporary restrictions on a Landlord’s ability to forfeit a commercial lease and utilise CRAR to pursue a tenant for unpaid rent until 30 June 2021.  The Government has also now extended, until 30 June 2021, the temporary restrictions introduced under the Corporate Insolvency and Governance Act 2020 relating to winding up petitions and statutory demands.  These changes were introduced by the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 (SI 2021/375) which include other changes, too.
 
The effect of the extension is to prevent a landlord (or any other creditor) presenting a winding up petition against a company that is based on a statutory demand served between 1 March 2020 and 30 June 2021.  Further, no winding up petition may be presented (at court) between those dates, based on the company’s inability to pays its debts, unless either (1) there are reasonable grounds for believing that COVID-19 has not had a financial effect on the company, or (2) the company would have become unable to pay its debts even if Covid-19 had not an effect on the finances of the company.  The Court cannot make a winding-up order on winding-up petitions unless it is satisfied these requirements are met.
 
It is still technically possible to serve a statutory demand, but it will not have the same effect and nor will the debtor perceive it to be the threat it once was.  Instead, a simple letter can be sent to the debtor demanding payment in the first instance, and the legal options can be considered later. 
 
Do remember that these restrictions only apply to companies; if your debtor is an individual, then the usual process will apply which requires the service of a statutory demand before a creditor can present a bankruptcy petition.

Further reading

Ganz v Petronz FZE & Goren – key decisions of the arbitration claim

Blog, Legal Updates
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The recent Judgment in the arbitration claim Mordchai Ganz v (1) Petronz FZE (2) Abraham Goren [2024] EWHC 635 has already received attention from legal pundits.  The DMH Stallard’s legal team (Tim Ashdown, Beatrice Bass and Patrick Murray) acted for the Claimant. DMH Stallard was supported by the legal team of Altshuler Law in Israel which is a collaboration enabled through their membership of LEInternational.
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Reversal of changes to High Net Worth Individual and Self-certified Sophisticated Investor criteria implemented

Blog, Legal Updates
18/03/2024
As discussed in our recent update, the government announced in the Budget that the eligibility criteria for the exemptions, which allow shares and other financial instruments to be marketed to High Net Worth Individuals and Self-certified Sophisticated Investors without the regulatory protections
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FCA to investigate personal guarantees in small business lending following a super complaint

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12/03/2024
The FSB has raised concerns that the demand for personal guarantees by lenders has a detrimental impact on small businesses accessing borrowing to grow
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ECCTA: Fundamental changes for companies and considerations for lenders: Practical points to note

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08/03/2024
Tyne Harman outlines some of the key considerations for lenders and borrowers alike to be aware of.
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