The Corporate Insolvency & Governance Act 2020 was announced on 23rd April 2020, and introduced by the UK Government on the 25th June 2020, having received Royal Assent. The Act was introduced for a number of reasons, companies could get longer periods of time granted by Companies House to file their Accounts, Confirmation Statements & Postpone AGM’s etc.
From a debt collection and litigation perspective, the act temporarily prevents a creditor presenting a Winding Up Petition to court on the back of an expired Statutory Demand, for the period between 1st March 2020 to 30 September 2020.
The Act also has an additional clause, that during the period 27th April 2020 to 1st October 2021, any creditor wishing to present a Winding Up Petition to court on the grounds of the debtors inability to pay its debts as they fall due, which is normally the case in a debt collection scenario, would have to demonstrate to the court that the companies inability to pay had not been caused by the Coronavirus Pandemic. This would most probably be very difficult to prove to a Sheriff or Judge.
Following spikes and clusters of the Coronavirus all over the UK, and further new restrictions and lockdowns being introduced, the Government extended the restrictions on Statutory Demands and Winding Up Petitions until the 1st October 2021.
Whilst we are in agreement with the Act, why it has been introduced and its effectiveness to protect businesses and their staff through the pandemic, there is two sides to this story which we feel may have been slightly over looked by the Government.
What are creditors supposed to do to keep their own cashflow going, if the debtor is unable to pay? They can raise a Judgment (England) or Decree (Scotland), but this is typically a very long process, and during the current times we find ourselves in Creditors need prompt payment of their outstanding accounts to keep trading as well as business that may have been badly effected by Coronavirus. Debt Collect UK have been working right through the pandemic, and have found since the Act was introduced debtors are using it as an excuse not to pay, and are therefore withholding their payment until the restrictions are lifted, some in the hope that the creditor will go through some sort of insolvency procedure themselves due to their non-payment of the account, particularly when dealing with high value debts.
Steven Little ACICM
Debt Collect UK Limited