Renowned business group GFG Alliance has found itself in hot waters after being faced with a winding-up petition and any attempts to have it dismissed on the grounds of the pandemic have been met with failure.
Why is GFG Alliance facing a winding-up petition?
Subsequent to the collapse of its lender, Greensill Capital, GFG Alliance faces pressure to swiftly find a new source of lending to pay off its creditors. Becoming increasingly skeptical of the firm’s financial health and its ability to pay off its debts, creditors such as Credit Suisse have initiated a winding-up petition to recover the debt owed to them.
What will happen to GFG Alliance?
The initial dismissal request for the winding-up petition made by GFG on the grounds of lower demand for products due to COVID-19 has been dismissed by the court. Credit Suisse will now be able to advertise the winding-up petition in a bid to rally creditors who may also be owed money by GFG. The winding-up proceedings, which are likely to proceed later this year on the merits of the case, will only affect three companies within the GFG Alliance Group, namely: Speciality Steel, Liberty Commodities, and Liberty MDR Treasury Company. Whilst debt restructuring between GFG Alliance and Credit Suisse are ongoing, the threat of a winding-up petition remains.
What does a winding-up petition do?
GFG Alliance is among a number of firms that are being scrutinised more deeply and facing winding-up petition after an internal review of the company’s financial health. A winding-up petition is a legal recourse taken, usually as a last resort, by creditors in a bid to recover outstanding debt. After the issuance of the requisite winding-up application before the court as well as service upon the debtor company, the court may order compulsory liquidation of the company’s assets (Section 123(1)(a), Insolvency Act 1986). This allows a creditor to recover an amount equivalent to the sum owed to them at risk of the debtor company’s existence.
What does the winding-up process entail?
It usually takes 21 days from when the creditor files a winding-up petition to liquidate a company. After the petition is filed, it is reviewed by the court and either accepted or denied. If a petition is approved by the court, it is dispatched to the company which then has seven days to act on the winding-up order. If the company fails to act within the seven-day window, the court approves the winding-up order to start the liquidation process. The winding-up petition will be advertised in the London Gazette and the company’s bank accounts will usually be frozen. At this stage, the powers of the directors also cease to exist. The court appoints an Official Receiver who will work with the directors to complete the liquidation process, and may later appoint a licensed insolvency Practitioner to take the role of the Official Receiver.
How can we help you oppose a winding up petition?
Our specialist winding-up petition lawyers are experts in defending winding-up petitions. We can advise you as to the specific merits and demerits of your case, and can assist you in opposing winding up petitions and negotiating with creditors.
If your company has been issued a winding-up petition or statutory demand, you may be able to challenge that petition on the following grounds:
- That the debt alleged in the statutory demand or petition to be owing is genuinely disputed on substantial grounds by your company;
- Your company has a genuine right of set-off against the creditor that exceeds the amount claimed in the statutory demand; or
- In certain other limited circumstances (for example such as jurisdiction, technical or procedural error or delay).
To oppose a winding-up petition, you will initially need to file a witness statement in opposition with the Court within five business days before the date when the petition will be heard by the Court (rule 7.16 of the Insolvency (England and Wales) Rules 2016). A copy of that witness statement will need to be provided to the petitioning creditor at least five business days before the hearing.
Your company is entitled to appear at the petition hearing so as to oppose the making of a winding-up order. It is a routine matter for companies to instruct solicitors and/or barristers to appear on their behalf at the hearing.
Instruct Specialist Winding Up Lawyers
We provide a no cost 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.