A Director’s Guide: Consequences of a Winding-Up Petition

The consequences for a company of the presentation of a winding up petition against it can be extremely serious.

We are leading experts specialising in insolvency proceedings. Our experienced City of London solicitors and barristers regularly assist companies facing a winding up petition; individuals served a statutory demand; or creditors owed money and considering issuing a winding up petition

What is a winding up petition?

A winding-up petition (WUP) is a legal action taken by a creditor or creditors against a company that owes them money.  If a company owes an outstanding balance of £750 or more, the creditor(s) can make an application to the court to issue a petition which will stipulate a hearing date and must be served at the registered office address of the debtor company. (Section 123(1)(a), Insolvency Act 1986).  

The court will grant a winding-up order if the petition is approved.  This will then allow the creditor(s) to appoint an insolvency practitioner as liquidator to collect the company’s assets and distribute them among the creditors in order to repay the debt

Will the company’s bank accounts be frozen if there is a winding-up petition?

Once a bank becomes aware of the winding-up petition made against a debtor company, it will freeze that company’s accounts, causing trading to cease.  This is done to prevent the company from dispossessing its assets as the movement of money in or out of the accounts can be detected.  The court can reverse transactions made by the company which is why transactions made by the company within the past two to five years are examined by the liquidator. 

In this instance, a company may be able to make an application to the court for a validation order under Section 127 of the Insolvency Act 1986 to unfreeze its bank accounts.  However, this process is lengthy due to the extensive amount of information and evidence that the court will require from the company to assess its situation before deciding whether to approve the validation order.   

Will a winding-up petition damage the company’s reputation?

Yes, potentially. When a winding-up petition is served on a company, it is advertised 7 days later in The Gazette prior to the court’s decision to dismiss or approve the petition.  The reason for this is to alert other creditors about the insolvency of the debtor company, prompting them to make a claim for their own debt in support of the original petitioner.  As a result of this, a company’s commercial reputation can be harmed and it may struggle to obtain credit whilst the petition is outstanding.

How are the directors of a company impacted by a winding-up petition?

If a winding-up order is granted, the company and its directors will be investigated by the liquidator to ensure that no ‘wrongful trading’ has taken place.  Thus, the company’s transactions will be examined and if evidence of fraudulent activity is found, this will be reported to the Insolvency Service which may result in a fine, the disqualification of the directors involved and a compensation order being granted.   

Furthermore, the directors may be made personally liable for the debts incurred by the company if the court decides that their actions were wrongful.     

Misconduct which may result in a director’s personal liability includes:

• Using company money for non-business purposes

• Making non-legitimate or illegal payments of dividends

• Selling company assets below market value

• Falsifying accounts and misleading company creditors

What can I do if a winding-up petition is served on my company?

It is important to respond to or bring an appeal against a winding-up petition within 7 days; otherwise the court is likely to grant the winding-up order.  This will then cause your company to enter into compulsory liquidation and whereby a receiver or appointed liquidator assumes responsibility for its assets and obligations.  It would also be sensible to seek the legal advice of a solicitor or insolvency practitioner to assist you with the best way to proceed in light of your circumstances.

If your company has been served with a winding-up petition, you can:

• Pay the creditor(s) – This will prevent the petition from being advertised in The Gazette and will halt the process of your company’s liquidation.  You may also be required to pay the original creditor’s costs of bringing the petition.

• Oppose the petition – If your company can bring forth evidence of a dispute in relation to the debt, provide this information to the creditor(s) and request that they withdraw the petition, the court will not grant the winding-up order.  This will afford you the opportunity to seek an injunction to prevent advertisement of the petition and prevent the creditor(s) from taking further legal action. 

• Form an agreement with the creditor(s) – You can enter into an agreement with your creditor(s) about how you can pay your debt and request that they withdraw the petition.

Dealing with Undue Pressure from Creditors

It is significant to note that before a winding-up petition may be presented to a company, the company must first receive a formal written demand for payment of a debt within 21 days (statutory demand).  This means that creditors cannot apply undue pressure on a company by threatening immediate presentation of a winding-up petition or early advertisement of a winding-up petition if a statutory demand has not yet been served.  If a creditor fails to abide by this rule, a company should consider obtaining an injunction to prevent the creditor from presenting a winding-up petition.

We represent you at Winding up Petition Hearings

Although we are based in the legal heart of London, operating as the only law firm in the historic Middle Temple Chambers, we provide comprehensive nationwide coverage to represent you at any winding up petition hearing. Our team of solicitors and barristers will prepare grounds of opposition and a witness statement for you.

We will represent you at the winding up petition hearing and will provide our own barristers or external local counsel to any hearing across the country.

Not based in London? We provide nationwide representation

That does not matter, we will represent you no matter where you are based in England or Wales.

If you contact us through our contact form, by email or by phone, one of our winding up petition team members will contact you by phone to discuss your matter and assess whether we can help you.

We will arrange a fixed fee conference with senior members of our winding up petition team. This meeting will take place either in person or using our video / telephone conference facilities. Therefore, no matter where you are based in England or Wales we can represent you.

Instruct Specialist Insolvency Lawyers

We provide a fixed fee initial case review to establish whether or not we can help you. We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inn of Court adjacent to the Royal Courts of Justice.  We are experts in dealing with matters surrounding insolvency in particular issues.  Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.

Want legal advice on Winding Up Petitions?

Our simple enquiry form goes immediately to our Insolvency team in Middle Temple, London. Call us on +442071830529 from 9am-6pm.

ACT PROMPTLY IN RELATION TO DEBT CLAIMS

Please note that if you have been served a statutory demand or winding-up petition or warned about your file being passed from HMRC’s Debt Management to HMRC’s Enforcement or Solicitor’s Office do not delay in taking legal advice. Your matter can be handled more effectively the sooner you obtain legal advice and representation.

Check Your Insolvency Case ✔

We analyse your winding-up petition prospects. We deliver strategic legal advice at your first meeting. We get optimal legal results. Want a first or second opinion on your case? Click below or call our lawyers in London on ☎ 02071830529

WARNING – OBTAIN SPECIFIC GUIDANCE & ADVICE

The information on this website is not legal advice; you should always obtain specific advice on the circumstances of your case. Our Winding-up Petition Solicitors & Barristers provide specialist legal advice based on decades of expertise. Click here or call +442071830529 to get in touch. For regulatory reasons we do not take on low value cases nor provide free legal advice, information or guidance and our team cannot answer questions from non-clients.

Call Now Button search previous next tag category expand menu location phone mail time cart zoom edit close