THE process that enables creditors to pursue struggling businesses at the High Court has resumed in the north after three years.
The Bankruptcy and Companies Master’s Court in Belfast has reopened to winding up petitions from Monday (April 17).
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.
Protections were established in Northern Ireland in the wake of the Covid-19 pandemic to give firms in financial distress breathing space to explore rescue and restructuring options free from creditor action.
But from Monday, 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.
Insolvency practitioner Darren Bowman, from Baker Tilly Mooney Moore in Belfast, expects an increase in the number of winding up petitions, particularly for so-called ‘zombie’ companies.
But he said many other businesses in financial distress could also be affected.
“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,” he said.
“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 (CVAs), which are a credible and formal way to getting a business back on track while repaying creditors.
“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.”
