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What is the impact of the Corporate Insolvency and Governance Bill?

Lodders’ dispute resolution specialists Victoria Khandker and Lydia Elvin explain the effect of the recent Corporate Insolvency and Governance Bill on debt recovery and rent arrears.

The Government has now published its Corporate Insolvency and Governance Bill (the Bill) which aims to support struggling businesses by amending insolvency and company law. This bill is relevant to any creditor owed money by companies who are having financial difficulties as a result of the pandemic and is of particular interest to landlords seeking to enforce rent obligations.

The Bill proposes that where a statutory demand has been served between 1 March 2020 and 30 June 2020, or one month after the Bill coming into force, whichever is later, the creditor may not present a winding up petition if the company does not satisfy the demand.

During that same period, no winding up petitions can be presented on other insolvency grounds unless a creditor has reasonable grounds for believing that:

  • Coronavirus has not had a financial effect on the company, or;
  • The facts would have arisen even if coronavirus had not had a financial effect on the company.

It remains to be seen if the provisions will be extended to have an effect beyond the current time frames given.

Debt recovery and lease obligations

If the legislation is brought into effect as per the Bill, it may be appropriate for creditors to consider other debt recovery measures such as bringing a debt claim through the courts instead of using a statutory demand. A judgment could then be obtained and enforced when the current bans are lifted. In respect of lease obligations, landlords should also consider other property specific enforcement measures, although many of these too have already been temporarily prohibited or diluted by other coronavirus related measures.

That said, the Bill is not yet law, and given that the second reading is not due to take place until 3 June 2020, until such time as it becomes law, the courts may not be able to resist petitions presented prior to that date.

Recent case

In a case heard at the end of April, Shorts Garden LLB v London Borough of Camden Council [2020], the court considered an application for an injunction to restrain the presentation of a winding up petition on the basis of Covid-19 and the proposed insolvency legislation. The Court held that they could not make a decision based on suggested legislation; they were required to make a decision on the law as it stood. The injunction was therefore refused.

However, the Bill does provide that if any petition is presented or a winding up order is made before commencement of the Bill, the court can restore the position to one as if the petition had not been presented, or the order can be regarded as void if the court would not have made it under the new legislation. As such, once the Act is passed, it can have a retrospective effect which will no doubt cause landlords to think twice before pursuing such remedies for the time being.

More information

If you have questions about how you can enforce your lease obligations or recover money owed to your business, please contact Victoria Khandker, Lydia Elvin, or any other member of Lodders’ Dispute Resolution team.

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If you’re a journalist looking for more information about Lodders, or to discuss a press release, please contact:
Diane Wood, V Formation on 07887 794507 or by email

Get in touch...

For more information, please contact Victoria Khandker on 01789 206123 or via email, or Lydia Elvin on 01789 206158 or via email.