INSOLVENCY/COMMERCIAL LITIGATION

Statutory Demands and Winding Up Petitions - Where are we now?

The Corporate Insolvency & Governance Bill recently came into effect in Northern Ireland making both temporary changes to Insolvency and Company Law to manage the difficulties of Coronavirus and changes that are more permanent.

The legislation states that a statutory demand served between 1st March 2020 and 30th September 2020 cannot be used as a basis for issuing a winding up petition against a company.

In addition, winding up petitions that claim a company is unable to pay its debts cannot be presented between 27th April 2020 and 30th September 2020 unless a creditor has reasonable grounds for believing that:

(i) Coronavirus has not had a financial effect on the company, or

(ii) The company would have been unable to pay its debts even if coronavirus had not had a financial effect on the company

The most recent guidance published on 28th July 2020 from the Bankruptcy and Companies Master in Northern Ireland, states that there is no change to the position regarding Creditors’ petitions in that the Master is not accepting the issue of any new winding up petitions unless the circumstances are exceptional and the Master has approved the presentation of the petition.

It does appear that whilst it is still possible to serve a statutory demand, it may not be worthwhile as it cannot be used to issue a winding up petition against a company and there is a risk that it will be challenged. The statutory demand is currently not the weapon it once was to get debts discharged. Instead, companies and individuals need to rethink how and with whom they do business. The circumstances of each case will vary so it is important to engage with a solicitor to obtain the appropriate debt recovery advice.

Should you require any advice please do not hesitate to contact Ashley Black on 02890200050 or by email at ashley.black@mmwlegal.com.

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