Author
Louise Jennings

Louise Jennings

Professional Support Lawyer

Read More
Author
Louise Jennings

Louise Jennings

Professional Support Lawyer

Read More

11 May 2021

R&I update – May 2021 – 2 of 4 Insights

COVID-19 in the UK – English courts extend the protection of companies from their creditors

  • Quick read

Re PGH Investments Ltd v Ewing [2021] EWHC 533 (Ch)

As we reported last month, the UK government has extended the restriction on winding up petitions until 30 June 2021. In a recent decision, English courts have observed that they would protect companies from their creditors even further than previously thought, by dismissing a winding up petition when the company argued that COVID-19 had had an indirect financial effect on it.

In this case, coronavirus had prevented the principal debtor from complying with its obligations and this had caused the company's alleged liability to arise (under a guarantee). The company did not, however, produce any documentary evidence to support its assertions.

Key points from the court's decision

  • The court accepted that it would be sufficient for the company to demonstrate that coronavirus had an "indirect financial effect" of this type and noted that the definition of “financial effect' in the relevant legislation is a wide one and it is sufficient for a company to demonstrate that its financial position worsened either "in consequence of" or "for reasons relating to" coronavirus.
  • The company nevertheless had to present enough documentary evidence of the financial effect. Even though the threshold for the test is low, the court found that the company would have failed to support its assertions that coronavirus had had a financial effect on it.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.

Subscribe
Subscribe

Related Insights

Full frame shot of pencils
Restructuring & insolvency

UK Court permits administrators to proceed with sale where low risk of sanctions breach

8 September 2022
Quick read

by Louise Jennings and Kate Hamblin

Click here to find out more
Large Silver Pipes Stacked
Restructuring & insolvency

Comfort for landlords – UK restructuring plan did not affect liability of guarantors

8 September 2022
Quick read

by Louise Jennings

Click here to find out more
Empty red chair in the middle of green chairs in row
Restructuring & insolvency

UK court rejects junior creditors' challenge to administrators' sale of luxury properties

5 August 2022
Quick read

by Louise Jennings and Kate Hamblin

Click here to find out more