Withdrawing a Winding-up Petition

Winding-up Petitions issued by creditors will often result in a debt being paid and a request to have the petition withdrawn or dismissed. Dismissal takes place at a Court hearing which the Company ought to attend by legal representative in order to ensure dismissal is obtained (note the risk of substitution by a supporting creditor). Withdrawal requires an application and adherence to appropriate procedural rules namely the Insolvency (England and Wales) Rules 2016 (IR 2016).

Why withdraw a winding-up petition?

The issue of a winding-up petition often results in debtor companies paying the petition after service of the petition or advertisement when they face severe consequences such as freezing of their bank accounts and difficulties with lenders. The petitioner if it has also recovered costs, will no longer have any interest in having the debtor company wound up and will likely have agreed to withdraw the petition. Alternatively, a petitioner could decide that it is not cost-effective to proceed if it considers there is a limited return likely in any liquidation or may accept a genuine dispute exists over the debt.

How to withdraw a winding-up petition?

A court application for permission has to be made to withdraw a winding-up petition. This can be lodged by the petitioner before the final hearing only with the permission of the court.

Rule 7.13, IR 2016 means that the court will only grant permission to withdraw a winding-up petition if:

1. The hearing of the application to withdraw is at least five business days before the hearing of the petition.
2. The petitioner has not yet given notice of the petition under rule 7.10 (ie advertisement in the London Gazette).
3. No notices (in support of or in opposition to the petition) have been received by the petitioner.
4. The debtor company consents to the withdrawal of the petition.

The draft order withdrawing the petition must contain:

1. identification details for the company;
2. the date the winding-up petition was presented;
3. a statement that upon the application made without notice to any other party by the applicant named in the order the court is satisfied that notice of the petition has not been given, that no notices in support of or in opposition to the petition have been received by the petitioner and that the company consents to this order; and
4. an order that, with the permission of the court, the petition is withdrawn.

Documents required to support the Application to Withdraw

The application must be made on notice to all parties and will be considered by an Insolvency Judge who will wish to see the following documents:

• Application notice;
• Draft Order being sought;
• Witness evidence with a statement of truth and exhibit confirming:
  • no advertisement under rule 7.10 and
  • no notices in support or opposition to the petition have been received and
  • that the debtor company consents to the withdrawal application.

A court fee will also need to be paid; this is the fee for an Application within proceedings (with notice) which has recently been increased by the Court from £70 to £155.

Process of withdrawal of winding-up petition

The petitioner issues the application for permission to withdraw by issuing the application at court and then the usual process is dependant on the Court in which the petition was issued:

• Royal Courts of Justice: an officer acting on behalf of the operations manager or chief clerk may deal with applications for permission to withdraw (paragraph 10.1(2), Practice Direction on Insolvency Proceedings (PDIP)).

• District Registry or County Court: the application will go before a District Judge (paragraph 10.2, PDIP).

The practice of some courts is to deal with these types of application without a hearing but the Court will determine this. If the court is satisfied it will make the withdrawal order.

Seeking Petition Dismissal if withdrawal is not available

If one or more of the circumstances set out above do not apply, the petitioner cannot apply for permission to withdraw the petition before the final hearing of the petition. Instead, the petitioner and the company can then seek the dismissal of the petition at the next hearing.

The danger with dismissals is that any creditor may apply to be substituted as petitioner and continue to seek a winding-up order (rule 7.17, IR 2016). If the company is then wound-up the liquidator may seek repayment of the paid petition debt and costs by virtue of s127 Insolvency Act 1986 if such payments were made without a court validation order.