COVID-19: Statutory demands against defaulting corporate tenants outlawed until October 2020

The Corporate Insolvency and Governance Act 2020 completed ‘ping pong’ in the House of Commons yesterday afternoon (25 June 2020), received Royal Assent at 6:08pm last night and takes effect today (26 June 2020).

At 254 pages, it covers a lot more than just statutory demands and winding-up petitions, including a new company moratorium procedure, but for property folk the immediate impact is that it effectively removes the statutory demand/winding-up route against defaulting tenants until at least 30 September.

• No winding-up petition may now be presented on the strength of a statutory demand served between 01 March and 30 September 2020, which means that a statutory demand served since 01 March can no longer be used to support a winding-up petition (even if the petition is presented after 30 September). This provision is retrospective to 27 April, and so any winding-up petition presented since 27 April on the strength of a statutory demand served since 01 March is retrospectively invalidated.
• Where not prohibited by the above (e.g. relying on a statutory demand served before 1 March, or on grounds other than a statutory demand), no winding-up petition may now be presented until after 30 September, unless the creditor has reasonable grounds for believing either that coronavirus has not had a financial effect on the company, or that the grounds/facts relied upon would have arisen anyway – the petition must include a statement to that effect. This provision is also retrospective to 27 April, and for petitions presented since 27 April where the condition is not satisfied, the Act requires the court to restore the position to what it would have been if the petition had not been presented.
• Where a winding-up petition is validly presented between 27 April and 30 September, and it appears to the court that coronavirus had a financial effect on the company before the presentation of the petition, the court can only make a winding-up order if satisfied that the grounds/facts relied upon would have arisen anyway. This is also retrospective to 27 April, and the Act provides that any winding-up orders made since that date that should not have been made, are void.

The Act does not affect the landlord’s ability to serve a statutory demand and institute bankruptcy proceedings against tenants (or perhaps guarantors) who are individuals rather than companies.