Winding-Up Petitions - Extension to Moratorium

The COVID-19 pandemic has had a severe financial effect upon individuals and companies alike. In order to assist businesses who are having financial difficulties as a result of the COVID-19 pandemic, the government issued restrictions that prohibited winding-up petitions being presented where the debtor’s failure to pay their debt is COVID-19 related.

These restrictions were initially scheduled to end on 31 December 2020, but that has since been extended to 31 March 2021. Unless it can be shown that the debtor’s debt was not related to COVID-19, then a creditor’s winding-up petition cannot be presented before 31 March 2021. 

This extension will be a welcome relief to those businesses and sectors that have suffered financially as a result of the pandemic, especially those who do not qualify for financial support or grants either from the government or from their usual lenders. 

On the other side of the coin, this extension will be frustrating for companies and individuals who may also be relying upon serving a statutory demand to prompt payment from their debtors and assist with their own cash flow issues. Whilst there will be a number of genuine cases in which COVID-19 is cited as a reason for default, a few opportunistic debtors may use this as an excuse and as a way of delaying the inevitable payment and/or insolvency. 

As there will have been restrictions in place for at least one year if the restrictions are finally lifted after 31 March 2021, the courts may face a plethora of winding-up petitions after this date, meaning that the inevitable consequences for the debtor may be delayed even further if the courts have a large number of winding-up petitions to decide upon.

Whilst these temporary restrictions upon creditors hinder their ability to pursue a winding-up petition in the near future, other options are available to creditors seeking to pursue payment in the immediate future. These options may be less expensive and more effective, and so issuing a winding-up petition need not always be the default course of action for a creditor. 

If you require any legal advice in relation to the serving of a statutory demand during these restrictions, or would like advice on the various other methods by which you can pursue payment of a debt, then George Mushahwar will be happy to assist. You can contact George on 01695 574201 / 01704 504 381 or by email.