Are you Winding me up?

The impact of the Coronavirus on Winding Up Petitions

One of the inevitable consequences of the social distancing measures put in place by the Government to tackle the Coronavirus is that there will be a significant squeeze on cash flow for many businesses across the country. As less cash comes in, it is inevitable that there will not be enough cash to pay expenses.

Ordinarily, if monies are due and owing from a Company, and the debt is not disputed, a demand for payment can be issued and backed up with the threat to issue a winding up petition if the full debt is not promptly paid. Whilst this can still be done - though that may change shortly, see below - the likelihood of a winding up order being obtained any time within the next 3-4 months appears increasingly unlikely.

Winding up proceedings tend to be issued in the High Court, Business and Property Courts, in London or a District Registry elsewhere in the Country. On 23 March 2020, an Order was made in the Companies Court in London whereby all 300+ winding up petitions that were due to be considered on 25 March 2020 were adjourned for between 12 - 19 weeks.

That Order was made as a direct response to measures put in place to combat the Coronavirus, with it being concluded that the Court could not remotely (that is, by video conferencing or telephone) properly deal with the 300+ outstanding winding up petitions that were due to be dealt with by the Court, and also that measures could not be put in place that would enable each petition to be dealt with in person, taking into account the safety and well being of those that would ordinarily be present in and around Court (which feasibly could have been around 50 people) to deal with the petitions.

It seems inevitable that a similar approach will be adopted in relation to all Winding Up proceedings for the foreseeable future.

Whilst no formal diktat has as at the date of this article yet been published confirming the same, it has been suggested that the Government intends to put in place measures to prevent, for 2-3 months at least, the making of winding up orders, including the prohibiting of the issuing of winding up petitions.

We will keep you updated as and when we have further news - watch this space.

If you have any queries arising from this article, or would like to suggest a topic for a future article, please contact Chris Drinkall on 01482 337367 or moc.s1713977704tillo1713977704r@lla1713977704knird1713977704.rehp1713977704otsir1713977704hc1713977704 Chris can also be followed on Twitter at @drinkall_chris and on LinkedIn.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.