Vol 18 (2021) - Issue 4

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Winding-up Proceedings Meets the COVID-19 Restrictions

Synopsis
The recent decision in PGH Investments Ltd v Ewing [2021] EWHC 533 (Ch) has provided valuable further guidance on the evidence required for a distressed company to benefit from the coronavirus test (the 'COVID-19 Test') in Schedule 10 to the Corporate Insolvency and Governance Act 2020 ('CIGA 2020').
Although the case ultimately turned on contractual interpretation, the judgment provides three points of note for practitioners.
First, there can still be merit in a company applying to restrain advertisement of a winding-up petition against it during the CIGA 2020 'relevant period', where the mere fact of the petition could pose serious consequences for it. This would neither be 'premature' nor 'pointless', despite the fact that: (i) the company could await the preliminary hearing currently required; and (ii) CIGA 2020 currently prevents publication of a winding-up petition until the Court has determined whether it is likely to be able to make an order.
Second, a company cannot merely assert that its business has been affected by coronavirus. The evidential burden of the COVID-19 Test falls first to the company, who must demonstrate a prima facie case supported by documentary evidence rather than bare assertions. The COVID-19 Test is intended to protect otherwise viable businesses from the financial harm of the pandemic, rather than providing wholesale protection from winding-up petitions at this time.
Third, the Court can only dismiss a petition based on an undisputed debt as having been made for a collateral purpose 'sparingly'. There must be a clear case of an ulterior motive to put pressure on the Company with the petition or threat of the same and/or evidence that the petitioner is not acting in the interests of his class of creditors.