Last month, the Government lifted the insolvency restrictions introduced to combat the Covid-19 pandemic. In particular, the repeal of Section 10 of the Corporate Insolvency and Governance Act 2020 (CIGA) should please creditors.

Creditors were still able to obtain winding-up orders. However, Section 10 of the act compelled them to:

• Only pursue debts of £10,000 or more
• Seek proposals for payment
• Wait 21 days before responding

Now creditors are free to pursue and recover (in a pre-pandemic fashion) any outstanding monies they are owed.

Debt recovery

This news should be beneficial to the debt recovery specialists and directors of small to medium-sized companies who were previously unable to:

• Collect overdue invoices
• Wind up insolvent companies

Many times between June 2020 and March 2022, we saw courts reject winding-up petitions because solicitors were unsure of the rules. However, we are debt recovery specialists who understood insolvency procedures.

Consequently, Insolvency & Law (I&L) successfully obtained at least a dozen winding-up orders while the Government restrictions were in place. For the past two years, things have been very favourable for debtors. But now the pendulum has swung back to creditors.

As a result, you can expect a significant increase in the number of winding-up petitions issued this year. Many directors are scared for their companies because creditors are:

• Chasing overdue invoices again
• Reengaging in debt recovery procedures

Call I&L on 0207 504 1300 to speak with an independent, professional advisor and learn how to protect your interests while recovering debts…

The post Insolvency and debt recovery specialists first appeared on Company Debt Recovery.

While the restricted use of statutory demands and winding-up petitions will provide a lifeline for many struggling companies, the move also forces creditors chasing overdue debts into an already overburdened court system.

As it stands, the only remedy to enforce payment of a debt is through a High Court enforcement officer. You may send out a bailiff or arrange a third-party debt order.

Alternatively, you may apply to the court to put a charge on any fixed property owned by the debtor. You will get an interim charge if you already have a judgment.

But a final charge may prove more difficult to obtain. This is because all the other creditors must be notified, and any 1 of them might object.

Whereas the consequences of Formal and Statutory Demands can encourage a debtor to pay quickly, county court proceedings take much longer, especially if the defendant tries to frustrate the proceedings by filing a contrived defence.

Weak defence

If the defence is weak, you can make an application for a summary judgment. But if the defence has merit, the court will give directions to set a timetable for the:

• Exchange of evidence
• Taking of witness statements
• Preparation of a trial

This process usually takes around 6 to 12 months. But a determined defendant can easily string that out for 12 to 18 months or more.

With only 54% of court and tribunal buildings in England and Wales currently open, legal experts predict the backlog of cases that built up during the first half of 2020 could take up to 12 months to clear.

In the long run, the changes being introduced to Her Majesty’s Courts & Tribunal Service, including video and phone calls, benefit everyone as better use of technology should vastly improve productivity.

But for now, creditors chasing overdue debts are faced with little option but to litigate and accept that payment is many months away.

The post Congested courts the only option for debt enforcement first appeared on Company Debt Recovery.

The Government’s decision to suspend the filing of Statutory Demands and Winding-up Petitions is a huge blow for creditors seeking to collect payment of outstanding debts.

As a result of the Corporate Insolvency and Governance Act, a creditor’s only debt enforcement remedies are through the county court via either a bailiff or a third-party debt order.

In response, a wisely-advised debtor can easily defend the claim and keep the action going for 12 to 18 months.

Although temporary, these measures could be extended further if the economic fallot from Covid-19 is worse than previously determined.

No single creditor should unduly benefit from a winding-up petition. But there are grey areas and so abuse exists.

For example, before the Covid-19 pandemic, some creditors would covertly use a winding-up petition as a debt recovery tool. They would say: 

“I issued a winding-up petition because I wanted to have the company wound up, not for debt collection purposes. But the directors claim the company is solvent. They resisted the petition and paid what they owed me. So now the petition serves no purpose.”

Bar set high

As it stands, the type of abuse described above will reduce considrebly because the bar has been set high for individuals issuing winding-up petitions.

To be successful, the petitioner must now prove the company:

• Is insolvent
• Was doomed to fail irrespective of Covid-19 (which is only practical for petitions relating to debts incurred in before 2020).

However, thanks to the new Bill, it is perfectly acceptable and credible for the defending company to respond by saying:

“We’d planned to pay you in May 2020 from the proceeds of a payment one of my customers was due to make. But they haven’t paid because they’ve been affected by Covid-19, which is why I’m unable to pay you.”

For creditors hoping to recover their losses quickly, the new legislation is completely useless and will ultimately lead to an increase in cowboy traders as the commercial environment degenerates into a chaotic frontier similar to the Wild West. 

It’s unclear exactly how long the provisions will remain in place, but they need to be lifted quickly. Once a debtor business stops paying its creditors, they become unable to pay their creditors.

This creates a catastrophic domino effect and business owners will eventually stop paying each other because the Government has given them all a valid and legitimate reason not to pay. A debtor company simply needs to tell its creditors:

‘We are unable to pay you because we have been affected (either directly or indirectly) by Covid-19.”

The post Stat demands and winding-up petitions post Covid-19 first appeared on Company Debt Recovery.

Cardiff was taken over in May by Malaysian gambling and property tycoon Sri Vincent Tan Chee Yioun and is just one of several English football institutions to fall foul of HMRC recently.
 
This year alone, Portsmouth, Preston, Notts County and Southend have all faced winding up orders.
 
Settling your bill is a sure way to get a petition dismissed. However, there are several ways to avoid a winding up order – compulsory liquidation.
 
Winding up petitions can be withdrawn if:
 
i)                   The petitioner decides there is no value in winding the company up. Once the threat is delivered and the debtor doesn’t pay, the petitioner may be unwilling to front the full cost of winding up proceedings.
 
ii)                The petition has not been advertised in the Gazette
 
iii)              No other creditor has supported the petition
 
iv)              The debtor gives consent
 
 
They can be dismissed if:
 
i)                   The debt has been paid
 
ii)                  The debtor goes to court and proves the petition has no real basis; disputed debt
 
iii)                There is a technicality. A petition needs to be spot on when issued and served. If it’s not technically correct, a judge can grant leave the petitioner to and amend it.

The post How Are Winding Up Petitions Dismissed and Withdrawn? first appeared on Company Debt Recovery.