The Insolvency Rules require notice of a winding up petition to be advertised in the London Gazette by the petitioner. The purpose of giving such notice is to inform other creditors and contributories of the company of the fact that a petition has been presented against the company and to enable them to attend the hearing and make submissions to the court. The advertisement can appear just seven days after service of the petition.
Once it has been advertised, a winding up petition may not be withdrawn and it must proceed to be heard by the court. It is inevitable that the petition will upon advertising come to the attention of the company’s bank and creditors as well as possibly others (such as the company’s employees, suppliers and customers). This can lead to the company’s bank accounts being frozen and may seriously damage the reputation and financial stability of the company.
A company’s immediate concern, therefore, will usually be to prevent the petitioner from giving notice of the petition in the London Gazette. In certain circumstances it is possible for a company to obtain an injunction to restrain advertisement of the petition. This eliminates some of the serious consequences of advertisement and directors should take immediate legal advice if they wish to pursue this option.
What do you need to prove to obtain an injunction?
The court will grant an injunction restraining advertisement of a petition where the petition amounts to an abuse of process or is otherwise bound to fail. Examples of circumstances in which a petition may be regarded as an abuse of process or bound to fail include:
- Where the alleged debt in respect of which the petition has been presented is genuinely disputed by the company on substantial grounds.
- Where the company has a genuine cross-claim or right of set-off based on substantial grounds for an amount either no less than £750 less than the petition debt, or equal to or exceeding the petition debt.
- Where the petition is bound to fail as a matter of law (for example, because the debt on which it is based is statute-barred) or as a matter of fact.
- Where the petition is oppressive or unfair to the company.
- Where the petition has been presented by the alleged creditor otherwise than for the purpose of getting the company wound up (a collateral purpose).
- Where the alleged creditor has another, more appropriate, remedy which he does not intend to pursue.
Procedure for seeking an injunction
The procedure on an application for an injunction to restrain advertisement of a winding up petition is as follows:
- The application must be made by an application as prescribed by the Insolvency Rules.
- The application must be in writing and signed by the applicant or its solicitor.
- The application must be supported by evidence. This will normally take the form of a witness statement with exhibits. The statement should set out the grounds on which it is alleged that the petition amounts to an abuse of process or is bound to fail.
- The application must be listed before a judge.
Our Winding-Up Experts are able to give specialist legal information and advice relating to applications to restrain. To contact one of our Solicitors or Barristers please click here or call 0845 8622 529.