Winding-up petitions and Covid 19

Some guidance is provided in the judgment on the impact of the Corporate Insolvency and Governance Act 2020 (“CIGA”) on winding up petitions.

• CIGA schedule 10 paragraph 19(2) suspends any insolvency rule that requires or permits advertisement of the petition until the court has made a determination as to whether it is likely to make a winding up order – consequently there is no need to apply for an order to restrain advertisement of a petition until this provision expires (currently 30 June 2021).
• CIGA schedule 10 paragraphs 5(1) and (3) provide that the court may wind up the company only if the court is satisfied that the facts giving rise to the petition would have arisen even if coronavirus had not had a financial effect on the company. The evidential burden of showing that coronavirus had a ‘financial effect’ is on the company.
• If the company can show a prima facie case of the financial effect of coronavirus then the evidential burden shifts to the petitioner to show that even if the financial effect of coronavirus is ignored, the company would still be unable to pay its debts as they fall due.
• In the present case the company produced insufficient evidence of the impact of the pandemic, making unsupported assertions about its impact on investors and creditors and the impact of travel restrictions.
• Notwithstanding the above the petition was dismissed as on a proper interpretation of the agreement underlying the petition debt, the company was not liable to pay the debt.

PGH Investments Limited v Sean Ewing [2021] EWHC 533