Insolvency: the emergence of Section 10, Condition B Notices
Throughout the pandemic, the government introduced a range of miscellaneous practice directions in order to provide temporary relief to companies who might otherwise face insolvency.
Pandemic restrictions – prior to 30 September 2021
In an attempt to protect companies that had fallen into debt during the pandemic from creditor enforcement action, the Insolvency Service restricted creditors from serving winding-up petitions and statutory demands on debtors. These restrictions were implemented from June 2020 until 30 September 2021, with a view to ensuring businesses would not unnecessarily be compelled into insolvency.
Insolvency proceedings – new restrictions – from 31 September 2021 to 31st March 2022
On 31 September 2021, new restrictions came into place with the purpose of ensuring that the Courts would not be inundated with insolvency proceedings and to reduce the strain upon small companies, some of whom, would have been operating at their normal capacity for the first time since the emergence of the pandemic.
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The first temporary amendment to insolvency legislation provided that winding-up petitions could not to be pursued against companies where the debt amounted to less than £10,000.00. The purpose of the restriction was to allow smaller companies to regain their financial health prior to creditors pursuing them for outstanding debts.
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The second amendment required all creditors to simultaneously serve a Section 10, Condition B Notice with a Statutory Demand. The Section 10, Condition B Notice enables the debtor to provide a creditor with a proposal for settlement of the outstanding debt within 21 days of the notice being served. The purpose of this amendment was to afford the parties the opportunity of seeking to settle claims prior to entering into corporate insolvency proceedings and to demonstrate that they had done so if proceedings ensued.
One peculiarity however arises regarding service of the Section 10 Condition B Notice and that is the services provisions which vary from those relating to service of other insolvency documents. Although the Section 10 Condition B Notice can be served in the ordinary course of either first, or second class post, it cannot be personally served at an office of a company unless it is delivered directly into the hand of a director or other authorised officer of the company. This process therefore is somewhat at odds with the provisions for service of Statutory Demands and many other legal documents, where in those instances, the document will be deemed to have been served if it has been delivered to company’s registered office.
We are aware that members of investigative services have contacted the Senior Technical Advisor at The Insolvency Service in order to gain clarification of the terms of service, after it was suggested that the anomaly could be an oversight. We have been informed that when writing the rule, as an emergency measure, it was envisaged that the Notice would be delivered by post rather than through a process server.
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Imaan Abdul-Karim |
Insolvency Restrictions - options after 31st March 2022
The above-mentioned measures will remain be in force until 31 March 2022, following which, the Insolvency Service could potentially:
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Extend the measures for a further period of time; or
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Amend the measures further; or
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Remove the measures and revert to the pre-covid rules.
Please note that the information above does not constitute or substitute legal advice. You should always consult with a solicitor directly should legal advice be required. If you have any questions about bankruptcy or insolvency, please do not hesitate to contact our Dispute Resolution team here at Lawson West Solicitors. Contact Us here.
Further information on this topic can be found at:
The Insolvency Service - GOV.UK (www.gov.uk)
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