As of 10 May 2022, the Bankruptcy and Companies Master published new guidance covering the changes to restrictions of bankruptcy petitions. The guidance highlights the key update which is the lifting of restrictions on creditors’ bankruptcy petitions (non-Crown).
These changes are incorporated under the Corporate Insolvency and Governance Act 2020.
Creditors’ Banruptcy Petitions (Non-Crown)
- Restrictions on creditors’ bankruptcy petitions are set to be lifted from 5 September 2022.
- To file these petitions the following new requirements must be met otherwise they will not be accepted when presented for hearing:
- The petition debt is grounded on a court judgment, decree or other court order which must accompany the petition when it is presented; and
- The petition is grounded on a statutory demand, dated and served on or after 1 June 2022.
- The guidance indicates that the Master will only make final orders for petitions where they are satisfied that the parties have agreed to such an order, or that it is right and just in all the circumstances to do so.
- The restriction on Crown petitions will remain in place until further notice.
Creditors’ Winding Up Petitions
- Guidance regarding Creditors’ Winding Up petitions has been deferred until the new proposed permanent moratorium rules come into effect (please see below).
New Proposed Moratorium Rules – A Breathing Space from Petitions
- The Corporate Insolvency and Governance Act 2020 introduced the moratorium to England and Wales. These rules are still to be enacted in Northern Ireland however the timing of this is uncertain in the absence the Northern Ireland Assembly.
- Once enacted it is hoped that the moratorium will allow financially distressed companies breathing space from enforcement action while they organise their affairs to make their rescue viable.
- The moratorium will be obtained through a court filing without creditor consent but can only endure for a maximum of 40 business days without such consent or a court order.
- However, the moratorium will not prevent enforcement action by financial creditors. Debt owed to such creditors that falls due during the moratorium must continue to be paid for the moratorium to remain in force.
Please note that although the Masters’ Courts gives guidance surrounding governance of insolvency, it is not a debt recovery court. It is therefore encouraged that debtors and creditors to try to first come to an agreement but if this cannot be achieved then the appropriate court proceedings should be issued.
If you have any questions about the above, please do not hesitate to contact our insolvency team, Ellen Forester firstname.lastname@example.org or Toby McMurray email@example.com for assistance.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.