A winding up petition can be brought against a company if it owes debts of £750 or more. Although the limit to issue a creditor bankruptcy petition was raised to £5000 in October this year the limit to issue a winding up petition has remained at £750.

If a winding up petition is successfully brought against a company that company will enter into liquidation and a liquidator will be appointed to sell the company’s assets for the benefit of the creditors. Once the liquidation is complete the company will be dissolved.

It is therefore important not to ignore a winding up petition as doing so could cause your company to come to an end.

We act on behalf of numerous companies in insolvency proceedings. One of our business clients was being chased for a sum of money which was not owed by them. Despite informing the creditor that they were pursuing the wrong company the creditor issued a winding up petition at Court. This was done to place pressure upon the company and in an attempt to force them to pay the debt.

Our initial response was to ensure that the petitioning creditor did not advertise the Petition in the London Gazette as this would undoubtedly cause our client’s bank accounts to be frozen and make it extremely difficult, if not impossible, for our client to continue to trade. The single action of freezing the company’s accounts can cause the company to fail.

Once we secured the client’s position in this respect we drafted a full and comprehensive defence for our client supported by witness statements and made an application to have the petition struck out on the basis that the same was an abuse of process.

Discussions between the parties continued and due to the arguments, we put forward the Petitioning Creditor agreed to withdraw the Petition within a few days of the hearing date. This saved significant costs for the client and ensured that the Petition was safely withdrawn.

Application for Injunction

As above preventing the advertisement of a petition is of the upmost importance to prevent the accounts of the company being frozen.

If a creditor fails to undertake that they will not issue a winding up petition or, if the petition is issued, that they will not advertise the same then the client will be forced to take injunctive action.

The client can initially apply to court for injunction preventing the creditor from presenting a winding up petition at court. We have previously acted for a property management company whereby the creditor served the company with a statutory demand. We responded to the demand on our clients behalf disputing the debt and putting forward our evidence of the dispute.

The insolvency procedure is only suitable for debts which are not substantially disputed. Bringing a petition for a debt which is disputed can be viewed as an abuse of process.

We requested an undertaking that the creditor would not issue a petition at Court as the debt was disputed. Although the creditor would agree to time limited undertakings, a full and unreserved undertaking was not forthcoming. All this served was increased costs for our client with the threat of a winding up petition hanging over them. We therefore advised our client to apply to Court for an order preventing the presentation of a winding up petition.

We obtained an interim order and sent the same to the creditor illustrating that the court had now barred them from issuing a petition. We provided them with the opportunity to sign a consent order confirming that they would refrain from issuing a petition at Court based upon this debt. The creditor signed the Order and we subsequently saved the client the costs of a second hearing or the costs of defending a winding up petition.

As a statutory demand is not required to be served prior to a winding up petition a client may not always have the opportunity to issue an injunction preventing the presentation of a winding up petition at Court.

Once a petition is presented the creditor can advertise the petition after 7 days of the client being served with the same. If the creditor fails to provide a full and unreserved undertaking confirming that they will not advertise the petition then the client has little choice but to make an application to court for an order preventing the creditor from advertising the same.

We have drafted the above application on numerous occasions including for one of our lender client whereby the creditor refused to provide an unequivocal undertaking not to advertise the petition. We issued the application in the course of the existing insolvency proceedings and the creditor quickly consented to the same. Again saving our client significant costs and also the detrimental consequences of the petition being advertised.

Do you need assistance in dealing with a winding up petition? If so, contact Hannah Vachre on 0161 833 0044 or email h.vachre@abacus-law.co.uk