Winding-up petitions
The Government has introduced measures in the Coronavirus Act 2020 that are intended to support businesses and protect them from the effects of the Coronavirus pandemic, so that those effects do not become permanent. In order to protect businesses from eviction by landlords, the Act created a moratorium on commercial landlords enforcing the forfeiture of leases for unpaid rent. This lasts until 30 September and can be extended if necessary.
	Following the enactment of these measures the Government has become aware that some landlords have been using other measures, including statutory demands followed by winding-up petitions, to put pressure on their tenants to pay outstanding rent immediately.
	Although enforcement action of this nature is currently known to be occurring amongst commercial landlords and tenants, any creditor might attempt to use these processes for debt collection purposes.
	A statutory demand is a possible first step of the insolvency legal process in which a creditor presents a company with a written demand requiring payment of an unpaid debt. Where a statutory demand is unpaid that can be used by the creditor to demonstrate to a court that a company is unable to pay its debts and used as grounds to present a winding-up petition to force the company into liquidation. Insolvency proceedings of this nature are not intended to be used as a tool for debt collection but are to deal with financial failure and tackle companies that are no longer viable. Once a statutory demand has been made, if the outstanding debt is not resolved within three weeks, the company is considered to be unable to pay its debts and winding-up proceedings can ensue. A statutory demand therefore poses a significant threat to the existence of the targeted company.
	The Government is legislating to temporarily prevent winding-up proceedings being taken on the basis of statutory demands and to temporarily stop winding-up proceedings where COVID-19 has had a financial effect on the company which has caused the grounds for the proceedings.
	The Act will prevent any statutory demands made against companies in the period between 1 March 2020 and 30 September 2020 from being used as the basis of a winding-up petition at any point on or after 27 April 2020.
	The Act also creates an additional condition that must be satisfied before a creditor can obtain a winding-up order against a company on the grounds that it is unable to pay its debts. During the restriction period, any creditor asking the court to make a winding-up order on those grounds must first demonstrate to the court that the company’s inability to pay its debts was not caused by the coronavirus pandemic.
	The measure will apply to any winding-up petition presented in the period from 27 April 2020 to 30 September 2020, and it includes provision to rectify situations where, following the announcement of the measure but in advance of its enactment, a petition has been brought under the pre-existing law.