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What is Schedule 10 and what does it mean for me?

An amendment to Schedule 10 of the Corporate Insolvency and Governance Act (2020) means creditors can now resume statutory demands and winding-up petitions, although some coronavirus-related protections remain and there have also been changes to the petition process.

Schedule 10 was originally enacted in 2020 in response to the threat to the viability of businesses caused by the COVID-19 pandemic. It temporarily restricted creditors from presenting winding-up petitions in cases where the debtor's financial difficulties were attributable to the pandemic. The restriction originally applied to winding-up petitions relating to Statutory demands served between 1 March and 30 September 2020 but was later extended to 30 September 2021.

New regulation

The latest Schedule 10 amendment changes the 'relevant period' from 1 October 2021 to 31 March 2022. If you're presenting a winding-up petition, there's no longer any requirement for you to show that the debtor's ability to pay the debt has been unaffected by the COVID-19 pandemic. However, there are several conditions that must be met for the petition to be valid:

  1. The debt must not be classed as 'excluded debt'. This means any sum payable by a tenant under a business tenancy (i.e. rent) that remains unpaid because of a financial effect of coronavirus. This provision supports the extended moratorium of forfeiture for commercial tenants.
  2. The debt must be owed by a company or other entity such as a limited liability partnership (LLP) and be both for a liquidated amount and be due for payment.
  3. The debt (or total of debts) must be £10,000 or more.
  4. Before presenting a winding-up petition, you must have delivered written notice (a Schedule 10 Notice) to the debtor.

Format of the written notice

The courts haven't provided a template for the format of the Schedule 10 Notice, although the information to be included is almost identical to that contained in a Statutory demand, including setting out full details of the outstanding debt. The one key difference is in the required response within 21 days. In the case of the Schedule 10 Notice, this is a request for proposals for repayment within that timeframe, rather than a demand for payment. The Notice should state that, if the proposals for repayment are not received within 21 days, you intend to present a petition to the court for the winding-up of the debtor.

To save time and avoid delays, it makes sense to serve a Statutory demand at the same time as a Schedule 10 Notice, so that the 21-day timeframes in each run concurrently.

Alternatively, you can apply to the court for an order that means you don't have to deliver a Schedule 10 Notice or give the debtor 21 days to make a satisfactory proposal.

What does this mean for you as a creditor?

The gradual phasing out of the temporary restrictions on the presentation of winding-up petitions will continue to offer some protection to smaller companies who may still be suffering from the economic effects of the pandemic. However, as a creditor, you can now rely once again on the service of a Statutory demand under Section 123 of the Insolvency Act. As long as you meet all the above conditions and proceed after 21 days of delivering a statutory demand and a Schedule 10 Notice, you can then present a winding-up petition with confidence, giving you an opportunity to recover at least a proportion of the outstanding debt from liquidation of the debtor's assets.

Expert assistance

At Redwood Collections, we're specialists in debt collection and our highly-trained team stay up to date with all the latest legislation and regulations. We can handle all aspects of insolvency proceedings on your behalf, issuing a Statutory demand and Schedule 10 Notice concurrently, followed by presentation of a winding-up petition 21 days later if there hasn't been a satisfactory response from the debtor. With our support, you can take appropriate action to recover monies in even the most difficult debt collection cases, helping your business Grow Stronger.

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