HomeFWJ TakeawayStatutory demand assistanceDefending a statutory demandStatutory demands – temporary changes to process and procedure due to Covid

On 1 October 2021 the temporary restrictions on presenting winding up petitions as found in Schedule 10 of the Corporate Insolvency and Governance Act 2020 (“CIGA”) were phased out.

A statutory demand is often the first stage towards the winding up of a limited company so whilst the temporary restrictions were in place,  there was no point in taking the first step of serving a statutory demand where it was not possible to present a winding up petition.

Those restrictions have now been lifted albeit with some important new requirements which all company directors and creditors should be made aware of. 

These new requirements (introduced to protect businesses from the financial effects of the coronavirus pandemic) will be in force until 31 March 2022.

The changes are important because where a winding up petition is to be presented, the petition must contain a statement that the new requirements have been complied with as follows:-

  • the liquidated debt exceeds the sum of £10,000 (the original threshold was £750);
  • the creditor has given formal written notice to the company seeking proposals for payment of the debt within 21 days; and
  • further the debt must not relate to unpaid rent unless the claim unless the creditor can say that it is unrelated to the pandemic.

The requirement of the formal notice inviting proposals for payment of the debt is entirely new, the purpose being to try to reduce the number of winding up petitions and to continue to support businesses to resolve financial difficulties.

Our view is that delivering the formal written notice along with the statutory demand to run concurrently, would satisfy the new requirements.

There are two important points to remember:-

  • that the formal notice to be given to the company inviting proposals must be in the prescribed form if it is to be compliant.

Where a company responds positively to the formal notice inviting proposals for payment, for now, it is unclear as to what test the court will apply when considering whether a debtor’s proposals for payment have been unreasonably refused.

However, in our experience sensible proposals for payment over time are generally more attractive than the prospect of a lengthy winding up process although each case has it’s own facts.

What is important is that you get it right. 

More so now with the new requirements as a precursor for winding up a company.

We are often instructed to present winding up petitions based upon unpaid statutory demands which have been served before our instruction or asked to advise where the statutory demand is being disputed.  The forms are widely available to enable anyone to complete the form and serve it and it can easily go wrong.

So it is important that the new rules are complied with if you are to reduce the risk of costly court proceedings and not lose valuable time.  If 21 days are lost as a result of failure to comply with the new requirements then that could be the difference between making a recovery of your debt or not.

If you are considering serving a statutory demand in relation to a debt then Francis Wilks & Jones have the expert team to help. Contact us today and speak to one of our friendly advisers.

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