Coronavirus v winding up petition – who wins?

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2 min read

The creditor presented a winding up petition against a debtor in respect of a construction debt following an adjudication and subsequent judgment.

The debtor objected to the petition on the ground that the Creditor did not have “reasonable grounds for believing that coronavirus has not had a financial effect on the company or the relevant ground would apply even if coronavirus had not had a financial effect on the company” pursuant to sub paragraph 2(3) to Schedule 10 of CIGA 2020.

The judge considered the facts and recent decisions on the new legislation and followed the two-stage approach laid down by ICC Judge Barber in the case of Re A Company [2020] EWHC 1551 (Ch):

  1. Initially, the Debtor Company has the evidential burden of showing a prima facie case that coronavirus has had a financial effect on the company before the presentation of the petition.
  2. If the Debtor Company establishes that coronavirus has had a financial effect, the burden then shifts to the Petitioning Creditor who has to demonstrate that, if the financial effect of the coronavirus is ignored, the Debtor Company would still be insolvent.

The judge agreed that the debtor had established that coronavirus had had a financial effect on the company before the presentation of the petition and that the petitioner had failed to demonstrate that, if the financial effect of the coronavirus is ignored, the Debtor Company would still be insolvent. The petition was therefore dismissed.

Re A Company [2021] EWHC 2289 (Ch)

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