How to get a Validation Order for a Winding Up Petition

If someone files a winding up petition against your company, the banks will normally freeze the company’s bank account as soon as the petition is advertised in The Gazette.

This is to protect themselves against the legislation stated in the Insolvency Act, Section 127 which states that any disposition of the company’s property after the beginning of the winding up is void.

When this happens, you will need a validation order from the courts in order to access the account.

If you have had a winding up petition served against the company, a validation order may help improve the company’s position.

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How to Get a Validation Order for a Winding up Petition

How to Get a Validation Order

If you need to apply for a validation order, the first stage in the process is to tell the person or company who filed the winding-up petition against the company. This notification must contain details about the court that you are submitting the application to and when you anticipate making the application.

Application to the Courts

The second stage is to make the application to the courts. There are two parts to the application: Form 7.1A and the witness statement. Both need to be filed at the courts, along with the requisite fee (currently £155).

The Court Hearing

After you’ve made the application, the courts will assign a date and time for a court hearing. This hearing only relates to the validation order, not to the winding up petition as a whole.

The hearing (along with the witness statement you’ve filed) is your chance to be able to make your case to the courts for why the company’s bank account should be unfrozen. You will need to have information about the circumstances that contributed to the winding-up petition being served, the financial position of the company and why the courts should grant the validation order. Normally they will want to see that the granting of the order will be be beneficial to the company’s creditors overall.

If the person who filed the winding-up petition objects to the company’s accounts being unfrozen, they will need to attend the hearing and make their case to the courts as to why the application should not be granted.

The courts will either make a decision at the end of the hearing, or set out any further information they require in order to make their decision – it’s likely that you will need to present this information at a follow-up hearing.

The Decision to Unfreeze the Bank Accounts

If the courts make the validation order, you’ll receive a copy or the order. You need to present this to the bank to enable the bank account to be unfrozen.

If the courts do not grant the order, it may be that you can appeal the decision. This is a difficult position as the court hearing for the winding up petition is likely to be quite soon and time is of the essence.

What will the Validation Order Cover?

It’s important to understand that validation orders very rarely will unfreeze the company’s accounts without any restrictions. It’s unlikely that the company will be able to trade freely – rather the order will specify that the company can undertake certain transactions that will be beneficial to its creditors.

Want to Talk?

If a winding up petition has been served on your company, the company is in a very serious position and time is of the essence. We are happy to help you with this process, or to advise in situations where a validation order may be an appropriate option – simply call Simon Renshaw on 020 8444 2000 or email sr@aabrs.com.

Written by Simon Renshaw