What are the Costs to Dismiss a Winding Up Petition?

In some cases, the mere serving of a winding up petition is enough to convince a company to pay the money it owes. If you decide to pay the debt before the court hearing, it’s important to make sure the winding up petition is withdrawn from the court record.

Having the winding up petition withdrawn in this way prevents the petition from being taken over by another creditor. If the winding up petition was to be substituted by another creditor and the company was subsequently wound up, the payment to the original petitioning creditor would have to be repaid to the liquidator. This is to prevent a ‘preference’ (i.e. one creditor being treated differently to the others) being created.

What happens if the petition is heard by the court?

A winding up petition can also be dismissed by the court. If the judge decides that the company is able to repay a reasonable proportion of the debt due via a Company Voluntary Arrangement (CVA), or an agreement with its creditors, then the petition can be dismissed.

Other grounds for the dismissal of a winding up petition include:

 

  • Abuse of process by the petitioner – For example, if the petitioning creditor uses the winding up petition to settle a dispute or gain a commercial advantage over a competitor.
  • The debt is not proven – If the petitioning creditor is not able to prove the existence or the amount of the debt. In this case the winding up petition can be adjourned or even dismissed and the judge can award costs to either party.  

What are the costs involved?

This really depends on the particular circumstances of the case. If the winding up petition is dismissed before the court hearing (due to a settlement being reached) then simply having the petition withdrawn will cost significantly less than having the petition heard in court. In this case you will simply need assistance to help draft the application to have the petition withdrawn.  

If you want to dispute the debt in court or believe the petition is an abuse of process, you will require professional legal representation and the costs will rise considerably.  

Have you considered a Creditors’ Voluntary Liquidation?

If you have been threatened with a winding up petition then a Creditors’ Voluntary Liquidation (CVL) can protect the company from this action. The key difference between with a CVL and being wound up by the court is that the company’s directors choose to take their business into liquidation, rather than being forced to do so by their creditors. A CVL gives directors more time to prepare for the closure of their company, and means they are considerably less likely to stand accused of acting improperly. 

You must act now

If you have been threatened with a winding up petition you have limited time to apply to the court. If you have received a winding up petition then you have just 7 days to stop it being advertised. Call Sue Collins now on 0208 444 2000 to discuss your circumstances or email: sc@aabrs.com.  

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