Corporate Insolvency and Governance Bill—temporary changes to winding-up petitions

Corporate Insolvency and Governance Bill—temporary changes to winding-up petitions

This News Analysis looks at the proposed temporary changes to winding-up petitions introduced by the Corporate Insolvency and Governance Bill.

What is the background to the changes?

The coronavirus (COVID-19) pandemic and the resulting lockdown and social distancing measures introduced by the UK government continue to have a profound effect on businesses and the economy. On 20 March 2020, the government announced that businesses including restaurants, pubs and leisure centres must close, and on 23 March 2020 a full lockdown was introduced, sending huge parts of the private sector into hibernation. The forced closure of businesses has threatened the financial health of many previously successful companies, while for those already struggling it has proved to be the tipping point.

In order to mitigate the economic consequences of coronavirus and keep the economy on life support, the government has introduced a range of measures, from financial support initiatives to legislative reform.

The Coronavirus Act 2020 (CA 2020) took effect from 26 March 2020, and contains a provision (CA 2020, s 82) prohibiting landlords taking steps during the ‘relevant period’ to forfeit a ‘relevant business tenancy’ on the grounds of non-payment of rent and other sums falling due under the lease. In response to this prohibition, it was found that landlords were instead looking to invoke the winding-up regime and on 23 April 2020 the Business Secretary announced further measures to protect commercial tenants from these ‘aggressive’ rent collection strategies and to ‘safeguard the UK high street’ by temporarily voiding statutory demands and winding-up petitions issued against commercial tenants.

The Business Secretary’s announcement was however met with confusion, as the ‘notes to editors’ supporting the press announcement suggested that this temporary voiding might apply to all winding-up petitions, and not just those issued against commercial tenants. This point was raised in Re Saint Benedict’s Land Trust Ltd; Re Shorts Gardens LLP [2020] EWHC 1001 (Ch), [2020] All ER (D) 159 (Apr) which concerned an application to restrain the presentation of a winding-up petition.

The Corporate Insolvency and Governance Bill

On 20 May 2020, the much-anticipated Corporate Insolvency and Governance Bill was introduced. The Bill seeks to make a number of far-reaching changes to UK insolvency law, some permanent and some temporary (see News Analysis: Corporate Insolvency and Governance Bill). Unlike the temporary changes to winding-up petitions, many of the changes are based on the 2016 Insolvency and Corporate Governance consultation, which the government responded to in August 2018.

For further information on the other key aspects of the Corporate Insol

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.