When a company is served with a winding-up petition, the resulting consequences can be extremely serious and a company should act quickly in order to protect its position.
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.
How can I prevent the service of a winding-up petition on my company?
It is important to inform all creditors if your company is experiencing cash flow issues. This will allow your company to negotiate new payment terms with creditors, who may offer you a repayment plan. Communicating with creditors about your company’s financial circumstances can prevent them from taking legal action against your company.
What can I do if a statutory demand is served on my company?
It is important to note that creditors must serve a statutory demand requesting payment of a debt prior to serving a winding-up petition on a company. The purpose of this is to prompt payment from a debtor company. Thus, within 21 days of receipt of a statutory demand, a company must pay the outstanding balance, negotiate payment terms with creditors, take insolvency action or apply for an injunction.
If a creditor applies undue pressure on a company by threatening to advertise the winding-up petition in The Gazette early or serving a winding-up petition without first serving a statutory demand, that company should seek a court injunction immediately to prevent the creditors from taking further legal action.
What is a county court judgement (CCJ)?
Creditors may also try to seek a county court judgment (CCJ) to recover a debt. The debtor company served with such an order must respond to it within 14 days by paying the debt or bringing a dispute against the claim. If a company fails to respond to a CCJ, the order will appear on the company’s credit report for six years which will significantly lower its credit score and negatively impact its ability to obtain a loan, credit card or bank account.
How can I defend a winding-up petition served on my company?
There are several options available to a company that has been served with a winding-up petition:
• Pay the creditor(s)
Full payment of the debt owed to the creditor(s) will prevent a winding-up petition from being advertised in The Gazette, although the debtor may also be required to pay the costs of bringing the petition to court. Alternative funding such as factoring or asset-based lending can assist with payment of a debt, depending on a company’s eligibility for these types of funding.
• Dispute the existence of the debt or the outstanding amount
A debtor can defend a winding-up petition if there is a disagreement as to whether the creditor(s) are owed money, the amount is disputed or the debtor has a right to set off the debt which would cancel it or reduce it to less than £750
A debtor in any of these situations should inform the court and provide sufficient evidence to show that there is a genuine disagreement in respect of the debt. The debtor should also seek legal advice and inform the creditors(s) involved that they are bringing a dispute against the alleged debt. Furthermore, the debtor should ask the petitioning creditor not to proceed further with the winding-up petition, else the debtor should apply for an injunction to postpone the advertisement of the petition or remove it from the court’s records.
• Agree to a company voluntary arrangement (CVA) with the creditor(s)
Agreeing to a CVA (payment plan) with the creditor(s) can prevent a winding-up petition from being issued against the debtor company. The agreement is legally binding and stipulates the repayment of part or the entire alleged amount owed to the creditor(s) over an agreed period of time.
• Negotiate with the creditor(s)
A debtor company can enter into negotiations with the creditor(s) to persuade them not to advertise the winding-up petition in The Gazette. This will prevent the company’s bank accounts from being frozen which will allow for the continuation of trading.
If a company can show that it is capable of repaying its debts, albeit not immediately, it may be able to enter into an informal agreement with the creditor(s) to discuss repayment options.
• Enter the company into administration
Administration is a process which attempts to rescue a company facing financial difficulties. Entering an insolvent company into this process will create a moratorium around the debtor company which prevents the creditor(s) form taking further legal action against it or from forcing it into liquidation.
• Enter the company into voluntary liquidation
Entering a company into voluntary liquidation when served with a winding-up petition allows it to deal with the effects of liquidation, including personal guarantees, redundancies and lease terminations.
• Request an adjournment
In order to prevent a winding-up petition from becoming a winding-up order, a company can submit a request to the court to adjourn or cancel the hearing of the winding-up petition.
What is the process of defending a winding-up petition?
If a company wishes to oppose a winding-up petition, it must file an affidavit (a written statement on oath) in court no less than 7 days before the date fixed for the hearing of the petition (rule 4.18(1), Insolvency Rules 1986). A copy of the affidavit should also be sent to the petitioning creditor to inform them that the winding-up petition is being opposed (rule 4.18(2), Insolvency Rules 1986).
Any of a company’s directors are entitled to attend the hearing of the winding-up petition to oppose it and a company may also instruct solicitors and counsel to appear at the hearing on its behalf. However, if a winding-up petition is opposed on grounds where consideration of evidence is required, such as the dispute of the debt; the practice of the Registrars of the Companies Court at the Royal Courts of Justice will adjourn the hearing so that the issue can be heard by the Registrar in Chambers.
What can I do if a winding-up order has already been issued against my company?
There are a few options available for a company faced with this situation:
• Rescission Order – A company can apply to the court within 5 working days of the winding-up order being made to rescind it if that company can pay its debts or could not attend the hearing of the petition.
• Stay of Proceedings – Although applying for a stay of proceedings will not reverse a winding-up order, it will stay the effect of a winding-up order for a set period of time if a company has agreed on a company voluntary arrangement (CVA) with its creditor(s).
• Administration Order – An insolvency practitioner can apply for an administrative order which overrides the winding-up order and enables them to be appointed as administrator of the debtor company.
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
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 assist you.
If we can, we will arrange a conference with a senior member of our winding-up petition team. This meeting will take place either in person, via our telephone conference facilities or via Skype, depending on your preference. Therefore, no matter where you are based in England or Wales we can represent you.
Instruct Specialist Insolvency 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), the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.
Please note that if you have been warned about your file being passed to HMRC’s Solicitor’s Office or have been served a statutory demand or winding-up petition do not delay in taking legal advice. Your matter can be handled more effectively the sooner you contact us.