Debt Recovery – Private & Commercial Litigation Solicitors | Insolvency Legal Advice |

Extension of Restrictions under Corporate Insolvency and Governance Act 2020

admin — Tue, 16 Nov 2021 10:43:14 +0000

As of yesterday, Thursday 24 September 2020, the Government has brought into force an extension to the operation of a number, but not all, of the restrictions and measures found within the Corporate Insolvency and Governance Act 2020 (“CIGA”). This has been done via Regulation 2 of The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 SI 2020/1031.

Statutory Demands and Winding up Petitions

The restrictions regarding service of statutory demands and winding up petitions have been extended by 3 months. The updated end date for these restrictions is 31 December 2020.

As such, no statutory demand will have been validly served between the period of 1 March 2020 and 31 December 2020. This applies regardless of whether the debtor or company has been impacted in any significant way by the coronavirus crisis.

Winding up petitions may not be presented for the full period of 27 April 2020 to 31 December 2020 unless the petitioner has ‘reasonable grounds for believing’ that the company would have been deemed insolvent even if coronavirus had had no financial effect on it.

Validation Orders and Company Meetings

The temporary rules regarding both seeking of validation orders and company meetings have been extended to 31 December and 30 December 2020 respectively.

No company subject to a winding up petition presented between 27 April 2020 and 31 December 2020 will have to apply for any validation orders under s.127 Insolvency Act 1986. This exemption does not depend on the company showing that it is only insolvent due to coronavirus related issues.

Regarding the temporary rules around company meeting (including no longer requiring meetings to be held in any particular place or to have a physical quorum, and allowing electronic voting), these have been extended to 30 December 2020, as opposed to 31 December 2020.

Small Suppliers and Ipso Facto Rules

The CIGA rules relating to ‘ipso facto’ clauses were enacted to prevent suppliers from terminating contracts with companies subject to various insolvency procedures.

To protect smaller suppliers, they were provided temporary dispensation from these rules. This dispensation has now been extended until 30 March 2021, and will allow ‘smaller suppliers’, as defined in s.15 CIGA, to continue to rely on ipso facto clauses.

Moratorium Regime

The Moratorium was a principle introduced in s.1 CIGA. The regime in CIGA set out which companies could invoke this new procedure, and which could not. The Government then introduced temporary modifications to increase the ease with which certain companies could invoke the Moratorium procedure.

The temporary modifications allowed a company to:

Use the out of court filing route (as opposed to having to apply to court);
Invoke the procedure even if the company had been subject to a CVA, administration, or Moratorium within the past year (initially, this would have disqualified a company from doing so);
Rely on a wider certification with regards to the rescue of the company via the Moratorium procedure.
- Temporary modification wording:
  - “it is likely that a moratorium for the company would result in the rescue of the company as a going concern or would do so if it were not for any worsening of the financial position of the company for reasons relating to coronavirus”.
- Pre-modification wording:
  - “likely…[to] result in the rescue of the company as a going concern”.

These temporary modifications have been extended to 30 March 2021.

Suspension of Liability for Wrongful Trading

his provision has not been extended. The previously set out date for the temporary suspension is 30 September 2020, and as such, this provision is still set to expire at midnight on Wednesday 30 September 2020.

Using a charging order to recover a debt secured with a personal guarantee

admin — Tue, 16 Nov 2021 10:25:55 +0000

If you are owed a debt which has been secured with a personal guarantee (“PG”) and the individual who provided that PG (“the Debtor”) has a beneficial interest in land, securities (for example, stock, dividends and interest in a trust) or has other assets, you may wish to consider imposing a charge over the same. Once a charge is in place, you can then seek an order for sale which would achieve a realisation of funds.

This method is most effective where there is substantial equity in land and the Debtor is the sole owner. Of course, we would not recommend pursuing a charging order and subsequently an order for sale if any relevant property did not have sufficient equity or if numerous individuals had an interest in the same. It is therefore important to consider the state of the Debtor’s resources before seeking a charging order.

By carrying out an official copy entry search you will be able to ascertain whether the Debtor is the legal owner of the property and discover whether there are any pre-existing charges on the title which will have priority over your potential charge, such as a mortgage.

An application for a charging order has two stages: (1) an interim order; and (2) a final order. The interim order is usually made without a court hearing. Once made, you can register the same with the Land Registry which will stop the Debtor from selling any property without your knowledge. Depending on the information provided in your application, the court may decide that a full hearing ought to take place in order to make the interim order final. If and when an interim order is made final, you will need to update the Land Registry.

If you require any advice in relation to obtaining a charging order in relation a debt you are owed, please do not hesitate to call our specialist dispute resolution team on +44 7441912822 or alternatively, contact us here

Commercial Debt Recovery: Pre-Action Protocols and Conduct

admin — Tue, 16 Nov 2021 10:23:08 +0000

The court will expect the creditor to have sent out a Letter Before Claim to the debtor, which would set out the basis of their claim and allow a reasonable amount of time for the debtor to fully respond. For straight-forward cases, it is expected that a response should be received within a period of around 14 days for companies or 30 days for individuals, although this can be extended if the matter is more complex.

As the parties will have set out the basis of the claim and the defence in response, they will be better placed to understand where their differences lie. Upon understanding the points in dispute, the parties are able to discuss those points in further details and to narrow down the issues in the hope of reaching an amicable settlement.

During the pre-action stage, the parties should consider whether they would be agreeable to settle the potential claim by entering into a payment plan, which could potentially preserve a business relationship that may otherwise be lost if legal proceedings were issued. Although a claimant may see a payment plan as a delay to getting paid, there is no guarantee that legal proceedings be any quicker in achieving the desired outcome.

Should the parties not be able to settle following the initial correspondence and communication, they should consider whether alternative dispute resolution (ADR) would be an appropriate next step, as the court insists on litigation being used by the parties as a last resort. Such ADR could include mediation, in which the parties would attempt to resolve their differences with the assistance of an independent mediator.

The pre-action stage will also provide the parties with an opportunity to consider whether expert evidence would be of any value, particularly in relation to the points in dispute.

The court expects the parties to have complied with these protocols and, if any party has unreasonably not complied, there could even be consequences in relation to costs. Should a party have not complied with the protocols without good reason, their conduct may be referred to the court by the other party when dealing with the issue of costs in those proceedings. An example of a party’s non-compliance of the protocols could be their unreasonable rejection of the other party’s offer of mediation, which could have led to the parties resolving the claim without unnecessarily utilising the courts time and incurring costs.

If you are owed money and are considering legal proceedings, you should make every effort to ensure that you have complied with the CPR, including the Pre-Action Protocols and Conduct. Given the potential costs penalties that could be imposed on you by the court for non-compliance, you may wish to seek independent legal advice and assistance before deciding to take the step of issuing a claim.

How We Can help

Our solicitors based in London have over 90 years’ experience in providing specialist legal advice on commercial debt recovery and litigation.

Based in the heart of legal London, just a stone’s throw away to the Royal Courts of Justice, the Employment Appeal’s Tribunal and Inns of Court.

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For more information please call us on +44 7441912822, complete a Free Online Enquiry or email info@jamesedwardassociates.com and one of our lawyers will contact you.