Common Defences for a Winding Up Petition

What is a Winding Up Petition?

A winding up petition is a petition from an unpaid creditor of a company that seeks to force the debtor company into liquidation through the compulsory liquidation process.

Any creditor can issue a winding up petition as long as they are owed more than £750 by the debtor company and can show that they have taken measures to pursue the unpaid debt.

How Can You Stop a Winding Up Petition?

If you act quickly, there are a few ways that you can defend your company against a winding up petition. The sooner you take action, the more likely it is that you can stop a winding up order being issued by the courts (which is much harder to reverse or counteract).

If you have received a winding up petition, you should seek professional advice immediately as you may be able to take one of the following courses of action:

  • Pay off the creditor (they will also want the costs of bringing the petition reimbursed too).
  • Agree a Company Voluntary Arrangement with the company’s creditors.
  • Put the company into administration. Administration creates a moratorium around a company, meaning that creditors can’t take legal action against it or force it into liquidation while it is administration.
  • Persuade the creditor not to advertise the petition. Once the petition has been advertised in The Gazette, the company’s bank accounts will be frozen and the petition will be a matter of public knowledge meaning other creditors can attach to the petition too. Delaying or preventing the petition from being advertised will give you some more time to try and sort the situation out.
  • Dispute the existence or the amount of the debt. This is a very serious step and you should only take it if you have evidence to substantiate it.
  • Request that the courts adjourn or cancel the hearing, with a full statement as to why they should do so.

If you do not halt or stop the winding up petition, the courts will hold a winding up hearing where they will consider the petition. If they deem that the company is unable to pay the petitioning creditor, they will issue a winding up order to the company. The courts will appoint an Official Receiver to start liquidating the company.

Can You Reverse a Winding Up Order?

The short answer to this question is yes, but it is very difficult. There are a few ways that you might be able to reverse a winding up order.

  • Rescission Order. You can apply to rescind the winding up order if you can show that you can pay the outstanding debts or if you couldn’t attend the winding up hearing. You will need to make the application within 5 business days of the order using the relevant fee and accompany it with the court fee of £155. You will need to attend another court hearing where you will need to argue your case for why the order should be rescinded. The court will rule to uphold or rescind the order as it thinks fit.
  • Stay of Proceedings. A stay of proceedings does not rescind the winding up order but stops the compulsory liquidation from proceeding any further. You will need to apply to the courts for a stay and accompany your application with all the relevant information. The court can order for a temporary or permanent stay if it sees fit, or for the liquidation to continue as previously ordered.
  • Going into Administration. A liquidator can apply for an Administration Order. This effectively rescinds the winding up order and allows the liquidator to be appointed as administrator of the company.
  • Company Voluntary Arrangement. If you can agree on a CVA with more than 75% of the creditors then the courts will order a stay of the compulsory liquidation process.

Being threatened with a winding up petition?

We can help, but the likelihood of us being able to help you successfully defend your company against a winding up petition very much depends on how quickly we can act after you receive the petition. Call Sue Collins for a no-obligation discussion on 020 8444 2000 or email sc@aabrs.com.