Winding Up Petitions and Coronavirus (COVID-19)
Further to our previous articles, based upon the impact of the Coronavirus (COVID-19) on company directors (https://www.actons.co.uk/latest/2020/03/the-impact-of-covid-19-on-your-duties-as-a-director/) and our short update on changes to insolvency legislation (https://www.actons.co.uk/latest/2020/03/covid-19-changes-to-the-insolvency-laws/), this article sets out the latest on winding up petitions and the associated practical considerations.
At the end of March, it was decided that winding up and bankruptcy petitions due for hearing in the Business & Property Courts (High Court) from 25 March 2020 onwards were to be adjourned until June 2020. Where parties to adjourned matters consider it to be urgent, they can apply for hearings to be re-listed but must satisfy specified criteria for the matter to be deemed sufficiently urgent (for example, petitions to wind up a company in the public interest).
Since then, the Temporary Insolvency Practice Direction (April 2020) has been released and the Business & Property Courts have begun to recommence the hearing of existing winding up petitions remotely, usually by Skype, in accordance with the Protocol for Remote Hearings. The Temporary Practice Direction will remain in force until 1 October 2020 unless amended or revoked in the meantime.
As set out in our update regarding the new measures discussed by Alok Sharma, legislation is to be introduced at the nearest opportunity to help businesses impacted by the Coronavirus. The reforms include fast tracking previously proposed measures such as:
- the introduction of a short moratorium for companies in financial distress (preventing creditor action, including the issue of winding up petitions) to help facilitate business rescue;
- the protection of essential supplies during the moratorium period, to enable companies to continue trading whilst they formulate a rescue plan; and
- action to improve the insolvency framework in cases of major failure.
Whether this would strike a fair balance between rights of companies seeking corporate rescue and those of creditors seeking repayments of debts remains an interesting consideration. However, it is clear that in the current climate, support and possible change is needed for all stakeholders.
Posted on April 22, 2020