Schedule 10 – CIGA 2020

Temporary protections were put in place under the Corporate Insolvency and Governance Act 2020 (“CIGA”) at the commencement of the coronavirus pandemic to provide enterprises, that were impacted, room to manoeuvre from the risk of winding up action. Nevertheless, the restrictions will not be lifted wholly. The UK government has introduced new temporary regulations through CIGA (Coronavirus) (Amendment of Schedule 10) Regulations 2021 (the “CIGA Schedule 10 Regulations”), that will be applicable between 1 October 2021 and 31 March 2022.

This modification states that statutory demands will be reinstated, but they will be phased in so that all relevant companies have a fighting chance of succeeding in the process of a winding up petition. Nevertheless, the new interim limits will still bar business landlords from filing winding-up petitions for “commercial rent arrears accumulated during the pandemic”, unless it can be demonstrated that the reason for non-payment is unconnected to the pandemic.

The filing of a winding-up petition is only feasible if four requirements are met:

• The debt must be liquidated, fallen due for payment, and not be an “excluded debt” – This last one is described as a debt in respect of any payment payable by a tenant under a business tenancy that remains unpaid due to a financial consequence of the pandemic.

• The creditor must have given notice to the company in accordance with paragraphs 1(4) and 1(5) of the new Schedule 10, which must contain:

• identification details for the company;
  • the name and address of the creditor;
  • the amount of the debt and the way in which it arises;
  • the date of the notice;
  • a statement that the creditor is seeking the company’s proposals for the repayment of the debt; and
  • a statement that if no proposal to the creditor’s satisfaction is made within the period of 21 days beginning with the date on which the notice is delivered, the creditor intends to present a petition to the court for the winding-up of the company.

• No proposal agreeable to the creditor is received by the 21-day deadline; and

• The creditor (or a group of creditors if all of them have satisfied Conditions A to C) is owed at least £10,000.

It is important to note that there is no precedent on how the court evaluates a creditor’s grounds for rejecting any suggestions made by the debtor, but until guidance is provided, it will be up to the individual creditor to decide if a proposal is sufficient or not. As a parallel to this argument, there is no duty to properly analyse each idea put up, but the court may take it into consideration when exercising its discretion, thus it may be prudent not to dismiss reasonable proposals out of hand.

Finally, while the burden of proof that operated in the coronavirus test, first explored in Re A Company [2020] EWHC 1551 (Ch), is no longer the base of the winding up petitions, undoubtedly we can see that the Amendment of Schedule 10, in essence, still creates some protections for companies affected by the pandemic have a fair chance as to negotiate a settlement of payment plan.

Valerie Faria