Investors are pursuing Liberty Commodities Ltd, part of the group Liberty Steel, over unpaid debts, with major banks Credit Suisse and Citigroup issuing a winding up petition against the company in March 2021. If you are a creditor or debt seeking advice on unpaid debts, particularly in light of COVID-19, our insolvency team can assist.
The Company is a metals trading company that was incorporated in April 1997. The wider group, GFG alliance has been struggling to fund its UK operations after its primary investor, Greensill went into administration on or around 8 March 2021. Using a winding up order, the banks will try to show that GFG and Liberties Commodities cannot pay what it owes, in which case its assets should be sold to repay them. The group has 5000 UK workers and reported a revenue of £4.2 billion in 2020 and Liberty Commodities plans to defend the winding up petition.
The case is to remain private until it has been listed for a non-attendance review pursuant to the Temporary Insolvency Practice Direction brought in as a result of Covid-19.
The parties are reported to have been engaging in settlement discussions to reach an amicable resolution whilst the company takes steps to manage its cashflow and refinance the business.
Summary of the winding up process
The presentation of a winding up petition to the court is the first stage of the winding up (or, as it is also known, compulsory liquidation) process. It means that the petitioner is attempting to have the company compulsorily put into liquidation by the court.
Upon winding up all the assets of the company are collected and distributed amongst creditors. The company will continue to carry on business and can enter and complete transactions but only for the purpose of winding up its’ affairs in the interest of creditors and shareholders.
However any other transactions entered into will be void and no contracts can be executed by the company. As a whole from the moment the company is wound up the company is stopped as a going concern.
The reasons why a person might seek to have a company wound up are broad ranging. The most common reason is that the company has become unable to pay debts owing to its creditors (see section 122(1)(f), Insolvency Act 1986 (1986 Act)).
How can a winding up petition be opposed?
Where the grounds to challenge the petition exist it would be sensible to oppose the winding up petition. A winding up petition may be challenged by a company on the following grounds:
- The debt alleged in the demand to be owing is genuinely disputed on substantial grounds by the company.
- The company has a genuine right of set-off against the creditor which exceeds the amount claimed in the demand.
- In certain other limited circumstances (for example such as Jurisdiction, Company likely to become insolvent, Technical or procedural error or Delay).
The procedure to oppose a winding up petition is to file a witness statement in opposition in court not less than five business days before the date of the hearing of the petition. A copy of the evidence must also be sent to the petitioning creditor as soon as reasonably practicable.
The company is entitled to appear at the hearing of the petition and to oppose the making of a winding up order. It is usual for a company to instruct solicitors and/or counsel to appear on its behalf at the hearing.
If the company chooses not to instruct legal representatives, any director is entitled to appear at the hearing on the company’s behalf, but other agents (such as the company’s accountant) cannot.
Instructing solicitors to advise on winding up petitions in COVID-19
Given the urgent nature of winding up petitions and the detrimental effects on a company and individuals livelihood, it is important to seek legal advice on any insolvency matter from the outset.
We’re masters of insolvency dispute litigation. We are a specialist City of London law firm made up of Solicitors & Barristers. We’re based in the Middle Temple Inns of Court (next to the Royal Courts of Justice where the High Court and Central London County Courts are based). We’re experts in dealing with matters surrounding insolvency in particular our team have unparalleled experience at 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. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.