Since Covid-19 led some tenants to withhold the March quarter we have been advising both landlords and tenants on the way forward.  We have been busy with statutory demands which seek to enforce payment of rent and also advising on applications for winding-up petitions.  Towards the end of April the Government announced that it would legislate to prevent landlords from serving statutory demands or presenting winding-up petitions where a company cannot pay its bills due to Covid-19.

Corporate Insolvency and Governance Bill 2020

A month  later the government has now published the Corporate Insolvency and Governance Bill 2020. There are eight measures included in the proposed legislation, which are intended to maximise companies’ chances of survival, protect jobs and support the country’s economic recovery through the current pandemic.

Like the Coronavirus Act before it, it is likely to shortly receive Royal Assent.

In brief summary (and so far as the Bill relates to insolvency proceedings):

Moratorium imposed
  • No winding up petition can be presented on or after 27 April 2020 on the ground that a company has failed to satisfy a statutory demand, if the relevant statutory demand was served during the period beginning 1 March 2020 and ending 30 June 2020.
Burden of proof on creditor
  • As regards the presentation of a petition on the basis that a company cannot pay its debts as they fall due, no petition can be presented by a creditor from 27 April 2020 until 30 June 2020, unless the creditor has reasonable grounds for believing that (a) coronavirus has not had a financial effect on the debtor, or (b) the debtor would have been unable to pay its debts even if coronavirus had not had a financial effect on the debtor. The burden of proof is therefore on the creditor to demonstrate to the Court that it has reasonable grounds for believing that coronavirus has not had a financial effect on the debtor or would not have mattered in any event. Given that very few businesses have been unaffected by the current pandemic, this will inevitably be a difficult test for the creditor to meet. This should therefore give businesses the opportunity to reach realistic and fair agreements with its creditors.
Duration of restrictions
  • The restrictions can be extended beyond 30 June.

For more information contact Leo Skinner.

Further details of the wide ranging provisions in the Bill will shortly be available on our dedicated Coronavirus Hub.

The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.