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Two new pieces of insolvency legislation

13 September, 2021

UPDATE 30 September 2021:
An error has been spotted in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021. They have been replaced with effect from 28 September 2021 by the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021. The error was not in the substance of the replaced Schedule 10, which is identical in both sets of Regulations, and the commentary below is still applicable.

Two new pieces of insolvency legislation have been passed which will come into force over the next 3 weeks.

First, on 29 September 2021 the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 come into force.  These amend Schedule 10 of the Corporate Insolvency and Governance Act 2020 by replacing the original schedule with a new one.  Those who deal with winding-up cases will know that Schedule 10 restricts the circumstances in which a creditor can petition for the winding up of a debtor company. Whilst it is unfortunate that the rules have been changed just as practitioners have got used to the old version, such is the nature of temporary, emergency provisions. The new Schedule 10 is considerably simpler than its predecessor.

In short, the new schedule states that a creditor cannot present a petition for the winding up of a company under section 122(1)(f) (“the company is unable to pay its debts”) unless 4 conditions are met.  Those conditions are:

  • The debt is (a) liquidated; (b) due for payment; and (c) not excluded;
  • The creditor has delivered a written notice to the company seeking proposals for payment of the debt;
  • The company has not, within 21 days of the notice, made a proposal for payment which is satisfactory to the creditor; and
  • The total petition debt is at least £10,000.

Debts excluded for the purposes of Ground A are those “in respect of rent, or any sum or other payment that a tenant is liable to pay, under— (a)  in England and Wales, a relevant business tenancy … and which is unpaid by reason of a financial effect of coronavirus.”  “Relevant business tenancy” is itself defined.

The definition of “excluded debt” contains the only remaining substantive reference in Schedule 10 to the coronavirus, and the requirement for a creditor to believe that “coronavirus has not had a financial effect on the company” before presenting a petition, found in the old Schedule 10, has been removed.

The provision is time limited and runs from 1 October 2021 to 31 March 2022.  Presumably a new practice direction will follow.

Second, from 1 October 2021 the Insolvency (England and Wales) (No.2) (Amendment) Rules 2021 makes extensive changes to the Insolvency Rules to incorporate the new moratorium procedure.  It begins by introducing Part 1A to the Insolvency Rules, containing the provisions applicable to the new moratoria.  The rest of the changes are consequential and other minor textual modifications to the remaining rules in the Insolvency Rules to include references to moratoria in the necessary places.

Simon Hunter
shunter@threestone.law

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