Your Guide to Validation Orders

What are Validation Orders?

A Companies Court Validation Order allows a company facing a winding-up petition to unfreeze bank accounts and continue to pay staff and trade. Validation orders are necessary after a winding-up petition is issued / advertised due to s127 of the Insolvency Act which voids all asset disposals unless validated by the Court.

A Judge can order a limited specific validation order or a general validation order depending on all the circumstances and what is in the best interests of all the creditors.

If you need a validation order our dual-qualified solicitors & barristers are the leading UK lawyers specialising in this area and can help; see our case assessment form or call us: +442071830529.

Why apply for a Validation Order?

Where a winding up petition has already been issued against a company, a validation order may be sought as a means of maintaining business operations. These Court orders permit the company to continue trading and making payments from their bank account, even if the account has been frozen. Not only do validation orders provide a means of ensuring ongoing business activity, they also serve to minimise the risk of personal claims being brought against the company’s directors, even if the company ultimately goes into liquidation.

By obtaining a validation order, companies can safeguard their interests and maintain operations in the face of significant legal challenges. Our experienced legal team can provide guidance and support throughout this process, and (per our reviews below) we have a demonstrable track record of helping businesses to navigate complex legal matters and achieve optimal outcomes.

Our Expert Dual-Qualified Solicitors & Barristers

Urgent Frozen Bank Account & Winding-up Advice

If you’ve received a winding up order, time is of the essence. Swift action is essential to determine whether the order can be removed. The longer the order remains on the court file, the greater the risk of creditors and the bank discovering it. This can quickly lead to a loss of trading ability, and potentially the failure of the company. Fortunately, our expert team can assist in the prompt removal of winding up orders.

In addition to winding up order removal, we also offer assistance with frozen bank accounts. If your company’s bank account has been frozen, we can help you regain access and keep your business operational. Our dedicated specialists have a proven track record of saving businesses in such situations. Don’t wait – contact us today for immediate assistance.

Experts in HMRC Winding-up Petition Defence

HMRC is the largest issuer of winding up petitions, and the resultant legal and financial difficulties can be overwhelming for businesses. However, our firm has a dedicated tax disputes team that specialises in addressing HMRC-related claims and navigating Time To Pay Arrangements, providing effective support to companies during difficult times.

We firmly believe that a combined approach is key to saving struggling businesses, and our tax dispute team is renowned throughout the country for their exceptional track record in this area. Led by a former HMRC Tax Barrister who also headed the National Tax teams of two of the ‘Big 4’ accountants, our team possesses the expertise and insight required to achieve optimal HMRC tax dispute outcomes for our clients.

If your business is facing HMRC-related challenges or threats of winding up orders, our HMRC Winding-up Petition Defence team is here to help. Contact us today to learn more about our tailored legal solutions and how we can assist in safeguarding your and your company’s interests.

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.

Rules on Making Validation Order Applications

The following is general guidance on the rules around validation orders. The process of obtaining a validation order is complex and not as simple as asking for one and receiving one in return sealed by the Court. A detailed application needs to be prepared and witness evidence lodged in support with all key financial and other information needed that will assist the Judge in reaching a determination in the interests of all the creditors of the Company.

You should therefore obtain specific guidance on your specific case from a qualified solicitor with experience of obtaining validation orders. Call our Validation Order team on 02071830529.

Insolvency Practice Direction – Validation orders

A company against which a winding up petition has been presented may apply to the Court after the presentation of a petition for relief from the effects of s.127(1) of the Act, by seeking an order that a certain disposition or dispositions of its property, including payments out of its bank account (whether such account is in credit or overdrawn), shall not be void in the event of a winding up order being made at the hearing of the petition (a validation order).

The application should be supported by a witness statement which should be made by a director or officer of the company who is intimately acquainted with the company’s affairs and financial circumstances. If appropriate, supporting evidence in the form of a witness statement from the company’s accountant should also be produced.

Serving Notice of the Validation Order Application

Save in exceptional circumstances, notice of the making of the application should be given to: (a) the petitioning creditor; (b) any person entitled to receive a copy of the petition pursuant to rule 7.9; (c) any creditor who has given notice to the petitioner of their intention to appear on the hearing of the petition pursuant to rule 7.14; and (d) any creditor who has been substituted as petitioner pursuant to rule 7.17. Failure to do so is likely to lead to an adjournment of the application or dismissal.

Validation Order Applications – Evidence in Support

The extent and content of the evidence will vary according to the circumstances and the nature of the relief sought, but in the majority of cases it should include, as a minimum, the following information:

  • when and to whom notice has been given including where applicable to the petitioning creditor; any person entitled to receive a copy of the petition; any creditor who has given notice to the petitioner of their intention to appear on the hearing of the petition; and any creditor who has been substituted as petitioner;
  • the company’s registered office;
  • the company’s capital;
  • brief details of the circumstances leading to presentation of the petition;
  • how the company became aware of the presentation of the petition;
  • whether the petition debt is admitted or disputed and, if the latter, brief details of the basis on which the debt is disputed;
  • full details of the company’s financial position including details of its assets (and including details of any security and the amount(s) secured) and liabilities, which should be supported, as far as possible, by documentary evidence, e.g. the latest filed accounts, any draft audited accounts, management accounts or estimated statement of affairs;
  • a cash flow forecast and profit and loss projection for the period for which the order is sought;
  • details of the dispositions or payments in respect of which an order is sought;
  • the reasons relied on in support of the need for such dispositions or payments to be made prior to the hearing of the petition;
  • any other information relevant to the exercise of the Court’s discretion;
  • details of any consents obtained from the petitioning creditor; any person entitled to receive a copy of the petition; any creditor who has given notice to the petitioner of their intention to appear on the hearing of the petition; and any creditor who has been substituted as petitioner (supported by documentary evidence where appropriate);
  • details of any relevant bank account, including its number and the address and sort code of the bank at which such account is held and the amount of the credit or debit balance on such account at the time of making the application.

Making an Urgent Validation Order Application

Where an application is made urgently to enable payments to be made which are essential to continued trading (e.g. wages) and it is not possible to assemble all the evidence listed above, the Court may consider granting limited relief for a short period, but there should be sufficient evidence to satisfy the Court that the interests of creditors are unlikely to be prejudiced by the grant of limited relief.

Validation Orders to Sell Property

Where the application involves a disposition of property, the Court will need details of the property (including its title number if the property is land) and to be satisfied that any proposed disposal will be at a proper value. Accordingly, an independent valuation should be obtained and exhibited to the evidence. Where the debtor is not trading or carrying on business and the application relates only to a proposed sale, mortgage or re-mortgage of the debtor’s home, evidence of the following may suffice:

  • when and to whom notice has been given;
  • whether the petition debt is admitted or disputed and, if the latter, brief details of the basis on which the debt is disputed;
  • details of the property to be sold, mortgaged or re-mortgaged (including its title number);
  • the value of the property and the proposed sale price, or details of the mortgage or remortgage;
  • details of any existing mortgages or charges on the property and redemption figures;
  • the costs of sale (e.g. solicitors’ or agents’ costs);
  • how and by whom any net proceeds of sale (or sums coming into the debtor’s hands as a result of any mortgage or re-mortgage) are to be held pending the final hearing of the petition;
  • any other information relevant to the exercise of the Court’s discretion;
  • details of any consents obtained from interested persons (supported by documentary evidence where appropriate).

Whether or not the debtor is trading or carrying on business, where the application involves a disposition of property the Court will need to be satisfied that any proposed disposal will be at a proper value. An independent valuation should be obtained for this purpose and exhibited to the evidence.

Validation Order Applications – Key Factors

The Court will need to be satisfied by credible evidence that the debtor is solvent and able to pay their debts as they fall due or that a particular transaction or series of transactions in respect of which the order is sought will be beneficial to or will not prejudice the interests of all the unsecured creditors as a class.

A draft of the order should accompany the validation order application.

Similar considerations to those set out above are likely to apply to applications seeking ratification of a transaction or payment after the making of a winding up order.

PRACTICE NOTE: VALIDATION ORDERS (S.127 INSOLVENCY ACT 1986)

Excerpt of Practice Note issued by the Chancellor of the High Court on 11 January 2007:

Companies

1. Section 127(1) of the Insolvency Act 1986 provides:

‘In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding up is, unless the court otherwise orders, void.’

Section 129(2) of the Insolvency Act 1986 provides that:

‘[T]he winding up of a company by the court is deemed to commence at the time of the presentation of the petition for winding up.’

2. A company against which a winding-up petition has been presented (‘the company’) may apply to the court after presentation of the petition for relief from the effects of the foregoing provisions by seeking an order that a disposition or dispositions of its property, including payments out of its bank account (whether such account is in credit or overdrawn), shall not be void in the event of a winding-up order being made on the hearing of the petition (a ‘validation order’).

3. In accordance with the Practice Note on the Hearing of Insolvency Proceedings of 23 May 2005 [2005] BCC 456, [2005] BPIR 688 an application for a validation order should generally be made to the registrar or district judge. An application should be made to the judge only (a) where it is urgent and no registrar or district judge is available to hear it, or (b) where it is complex or raises new or controversial points of law, or (c) is estimated to last longer than 30 minutes.

4. Save in exceptional circumstances, notice of the making of the application should be given to (a) the petitioning creditor, (b) any person entitled to receive a copy of the petition pursuant to r.4.10 of the Insolvency Rules 1986, (c) any creditor who has given notice to the petitioner of his intention to appear on the hearing of the petition pursuant to r.4.16 of the Insolvency Rules 1986, and (d) any creditor who has been substituted as petitioner pursuant to r.4.19 of the Insolvency Rules 1986.

5. The application should be supported by written evidence in the form of an affidavit or witness statement which, save in exceptional circumstances, should be made by a director or officer of the company who is intimately acquainted with the company’s affairs and financial circumstances. If appropriate, supporting evidence in the form of an affidavit or witness statement from the company’s accountant should also be produced.

6. The extent and contents of the evidence will vary according to the circumstances and the nature of the relief sought, but in the majority of cases it should include, as a minimum, the following information:

(a) when and to whom notice has been given in accordance with paragraph 4 above; (b) the company’s registered office;
(c) the company’s nominal and paid up capital;
(d) brief details of the circumstances leading to presentation of the petition; (e) how the company became aware of presentation of the petition;
(f) whether the petition debt is admitted or disputed and, if the latter, brief details of the basis on which the debt is disputed;
(g) full details of the company’s financial position including details of its assets (including details of any security and the amount(s) secured) and liabilities, which should be supported, as far as possible, by documentary evidence, e.g. the latest filed accounts, any draft audited accounts, management accounts or estimated statement of affairs;
(h) a cash flow forecast and profit and loss projection for the period for which the order is sought;
(i) details of the dispositions or payments in respect of which an order is sought;
(j) the reasons relied on in support of the need for such dispositions or payments to be made;
(k) any other information relevant to the exercise of the court’s discretion; and
(l) details of any consents obtained from the persons mentioned in paragraph 4 above
(supported by documentary evidence where appropriate).

7. Where an application is made urgently to enable payments to be made which are essential to continued trading (e.g. wages) and it is not possible to assemble all the evidence listed above, the court may consider granting limited relief for a short period, but there should be sufficient evidence to satisfy the court that the interests of creditors are unlikely to be prejudiced.

8. Where the application involves a disposition of property the court will need details of the property (including its title number if the property is land) and to be satisfied that any proposed disposal will be at a proper value. Accordingly an independent valuation should be obtained and exhibited to the evidence.

9. The court will need to be satisfied by credible evidence that the company is solvent and able to pay its debts as they fall due or that a particular transaction or series of transactions in respect of which the order is sought will be beneficial to or will not prejudice the interests of all the unsecured creditors as a class (Denney v John Hudson & Co Ltd [1992] BCLC 901, [1992] BCC 503, CA; Re Fairway Graphics Ltd [1991] BCLC 468).

10. A draft of the order sought should be attached to the application.

Ratification of transactions

Similar considerations to those set out above are likely to apply to applications seeking ratification of a transaction or payment after the presentation of a petiion or making of a winding-up order.

Contact our Specialist Validation Order Lawyers

Looking for expert legal assistance for a winding up petition? Our lawyers are the leading Validation Order solicitors and barristers in England & Wales. We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice.  We are experts in dealing with matters surrounding insolvency. We provide national coverage across all Courts in England & Wales.

If you’ve been served with a winding up petition, we can help you unfreeze your bank account, reverse the winding up order, and get back to trading. Our experienced lawyers are on hand to guide you through the legal process, regardless of the specifics of your situation.

Don’t let a winding up petition spell the end of your business – contact us today to learn more about how we can help. Our friendly team is dedicated to providing personalised, effective legal counsel to meet your unique needs.

Our team of expert Barristers & Solicitors are able to advise and assist your company in applying for and obtaining a Validation Order. Contact us by clicking here or calling +442071830529.

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.

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