Warning after bankruptcy court reopens to creditor winding up petitions
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The process that enables creditors to pursue struggling businesses at the High Court has resumed in Northern Ireland after three years.
Protections were established within the province following the Covid-19 pandemic to give firms in financial distress space to explore rescue options free from creditor action.
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Hide AdHowever the Bankruptcy and Companies Master’s Court in Belfast reopened to winding up petitions from today (Monday), and local insolvency practitioner believes it could prompt the pursual of a significant number of Northern Ireland businesses in financial distress.
It follows the introduction of the Insolvency (Amendment) Rules (Northern Ireland) 2023 last month, which effectively ended the three-year restriction on creditor winding up petitions.
From today, the new winding up petitions may be presented by any creditor owed more than £750 by a company. Petitions will still depend on certain criteria being met. The petition must be grounded on a formal demand made on or after March 13 2023 that originated from a court judgement, decree, or other similar court order.
In response insolvency practitioner Darren Bowman, a partner at Belfast accountancy and advisory practice Baker Tilly Mooney Moore warn the movement will bring about an increase in the number of winding up petitions, both relating to ‘zombie’ companies as well as other struggling firms.
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Hide AdAs the creditor petition process returns to normal, he adds that business owners will be best placed to examine the flow of cash within their business, investigate their liabilities and seek expert advice if they are struggling.
Darren said: “Today’s reopening of the High Court to creditors’ winding up petitions is an expected development that represents another step towards normal insolvency practices following the disruption of Covid-19.
"What businesses need to know now is that as creditors reclaim the mechanism of winding up petitions, there are fewer safeguards and protections in place before the initiation of formal insolvency proceedings.
“That said, many rescue and recovery options are available including Company Voluntary Arrangements, which are a credible and formal way to getting a business back on track while repaying creditors.
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Hide Ad"In Northern Ireland, there is a wealth of locally accessible advice on debt and insolvency issues and many mechanisms to restore business value and viability exist and should be explored fully.
"With the insolvency court now open to creditors winding up petitions, businesses should assess their liabilities and seek urgent, expert advice if under financial stress.”