- South Square - https://southsquare.com -

CIGA Extension June 2021

On 16 June 2021, the Business Secretary announced in Parliament that the temporary restrictions on winding-up petitions and statutory demands implemented in the Corporate Insolvency and Governance Act 2020 (‘CIGA’) are being extended for a further three months.1 These temporary provisions, along with the other provisions of CIGA, were discussed in the July 2020 “Special Edition” of the Digest by Mark Phillips QC [1], William Willson [2] and Clara Johnson [3]2 and the restrictions on winding-up petitions and statutory demands in particular were discussed by Hilary Stonefrost [4] and Daniel Judd [5].3

The winding-up and statutory demand restrictions in CIGA were originally due to expire on 30 September 2020. They were initially extended to 31 December 2020.4 Further extensions then took place to 31 March 2021 5 and to 30 June 2021.6 Given the Government’s announcement the current expiry date of the temporary restrictions is the end of September 2021. However, whether the Government sticks to that date will (as the history of the extensions tells us) depend on the course of the pandemic. The extension also makes it all but inevitable that a new Temporary Insolvency Practice Direction (the current version expires on 30 June 2021) will be brought out to ensure that the procedure for dealing with the temporary restrictions continues.

The effect of the extension is that a winding-up petition cannot be presented on the basis of a statutory demand served from 1 March 2020 to the end of September 2021. While the other grounds for winding-up a company remain open, until the end of September 2021, a petitioner cannot present a petition unless they have reasonable grounds to believe that the pandemic has not had a financial impact on the Company, or that the relevant grounds would have applied even if the pandemic had not had an effect on the Company. Additionally, a court may not make a winding-up order unless it satisfied that this test has been met.

These further amendments will be the subject of an article in the forthcoming July 2021 edition of the South Square Digest.