Since the start of the pandemic in March 2020, UK businesses who owe money to a person or business have been protected from the temporary restrictions on winding-up petitions and enforcement action by creditors. From the 1st October 2021, new legislation has partially relaxed the ban on issuing winding up petitions until 31st March 2022, when all restrictions will end. Now we expect to see a wave of frustrated unpaid creditors taking legal action and issuing winding up petitions to reclaim their money, leading to an increase in corporate insolvencies.

Simon Gilbert, Head of Litigation and Dispute Resolution at RJS Solicitors, has emphasised the importance of businesses faced being wound up to get practical legal advice and outlines the new rules for creditors issuing winding up petitions.

New WUP Rules from 1st October 

The new rules for issuing a winding up petition until 31st March 2022:

  • A creditor must be owed a minimum of £10,000 or more.
  • A creditor must issue a written notice of the debt to the debtor and ask for satisfactory payment proposals within 21 days. If no satisfactory proposal is made within 21 days of the date of the delivery of the notice then the creditor intends to petition for the company’s winding up.

However, a creditor cannot present a winding up petition:

  • If the debtor company has received a notice to make satisfactory proposals for payment of debt within 21 days.
  • If the debt is less than £10,000 or
  • If the debt is for unpaid commercial rent, due to the result of the financial effect from COVID-19.

What should a company do if faced with a winding up petition? 

A company faced with a notice under Schedule 10 or the threat of a winding up petition needs to act fast and should consider the following:

  • Specialist legal advice should be sought as soon as possible. If the debt claimed is disputed, or if the company has a cross-claim against the petitioner, the company may need to obtain an injunction to either restrain the presentation of a petition or prevent it from being advertised.
  • If the debt is owed, the 21-day period provided by the Schedule 10 notice (or an agreed extension of that period) can be used to negotiate a settlement. This opportunity should not be lost.
  • If the company is unable to pay its debts, its directors should seek advice from an insolvency specialist. If the company continues to trade despite being insolvent, the directors risk personal liability.

For further queries or information, please do not hesitate to contact Simon Gilbert or any other member of our Litigation & Dispute Resolution team – Tel: (01782) 646320 – Email: simon@rjssolicitors.com.