COVID-19 Update – 11 December – Extension of the restrictions on issuing statutory demands and winding up petitions

The Government have recently announced an extension of the restrictions on issuing statutory demands and winding up petitions.

These restrictions were due to end on 31 December 2020 but have now been extended to 30 March 2021, in line with most other Covid related protections, with the exception of suspension of liability for wrongful trading, which will expire on 30 April 2021

The wrongful trading provisions under the Insolvency Act 1986 provide that a director of a company which goes into insolvent liquidation or insolvent administration may be ordered by the court to make a contribution to the company’s assets if, at some time before the commencement of the administration or winding up, the director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation or insolvent administration and then failed to take every step with a view to minimising the potential loss to creditors as he ought to have taken.

The Regulations provide that in determining the contribution to a company’s assets that a director who has wrongfully traded should make, the court is to assume that the person is not responsible for any worsening of the financial position of the company or its creditors that occurs during the period from 26 November 2020 to 30 April 2021.

The explanatory memorandum accompanying the regulations which bring these changes into effect acknowledges that the temporary restrictions on statutory demands and winding up petitions are “a significant intervention into the normal working of insolvency law” and accordingly, the Government will keep these temporary measures under constant review.

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