Government announces relaxation of Covid Corporate Insolvency protections

The Government relaxed the protections that it introduced following the start of the first lockdown in March 2020. The changes will apply from 1 October 2021 to 31 March 2022 and it is anticipated that they will lead to an increase in winding ups that have been on hold while the protections were in place, and which were caused by the impact of the pandemic.

The protections which came in as part of the Corporate Insolvency and Governance Act 2020 (CIGA20) prevented the use of statutory demands and restricted the use of winding up petitions.

The changes from 1 October 2021

A creditor will now be able to:

  1. Present a winding up petition against a debtor company provided the debt or debts outstanding amount to £10,000 or more (the threshold was previously £750 or more); and
  2. Serve a statutory demand on a debtor company to demonstrate the company’s insolvency due to its inability to pay its debts.

However, a creditor will still be unable to present a winding up petition:

  1. Unless a schedule 10 notice under CIGA20 has been served first on the debtor company, requesting that they make satisfactory proposals for payment of the debt within 21 days. A creditor can apply to the Court for an order asking that this requirement be dispensed with in emergencies.
  2. If the debt is less that £10,000.
  3. If the debt relates to unpaid commercial rent which is due because of the financial effect of the coronavirus on the debtor company. This is in line with the Government’s extension of the ban on forfeiture for non-payment of commercial rent to March 2022.

What if you are the debtor company?

If you find yourself on the wrong end of these changes – what should you do?

  1. Take the matter seriously and address it.
  2. Take advice on your company’s position from an insolvency specialist. It could be that terms can be offered or that a company voluntary arrangement or administration could be put in place to avoid a winding up.
  3. Take advantage of the 21 days offered by the Schedule 10 notice under CIGA20 and/or any statutory demand to come up with and explore terms with your creditor(s).
  4. Company directors are under a duty to act in the best interests of company creditors when faced with insolvency. Failure to do so could lead to personal liability. It is therefore important that company directors are seen to, and do, act appropriately.

If you have any questions relating to the insolvency changes or need advice, please do not hesitate to contact Graham Mead, a partner in our commercial litigation team on 01473 298234 or

Graham Mead