How is a Winding Up Petition Dismissed if a Company enters into Administration?

If a winding up petition has been issued against your business then there are fewer options available to rescue your company than there would have been before the petition was served. However, it is still possible to save the business, but you MUST ACT IMMEDIATELY.

Once a winding up petition has been served it severely limits the actions a company can take. For example, you cannot:

  • Sell the company or its assets as this sale may be reversed by the court;
  • Issue a Notice of Intention (NOI) to appoint an administration;
  • Issue new securities or charges
  • Put the company into a creditors’ voluntary liquidation
  • Put the company into a pre-pack administration

Despite these restrictions, there are some potential routes you can still take. For example, if the business is still viable and has a good future then an administration could be used to defend your company against the petition. But, you cannot simply place the company into administration as before. These are the steps you must take…

Entering into administration

Once the winding up petition has been served, it is no longer simply the case of organising a pre-pack sale or placing the company into administration yourself. To use either of these options, you must apply to the court for the winding up petition to be adjourned before it can consider whether an administration order would be in the best interests of the creditors and the petitioner.    

It’s important to note that the court will not agree to adjourn a winding up petition without good reason. As such, the assistance of a legal professional, backed up with documentary evidence, will help you argue your case. If agreed, the adjournment will give an insolvency practitioner the opportunity to determine whether the company is suitable for administration.   

If an insolvency practitioner believes an administration is appropriate in your particular case, they will apply to the court for an administration order to be made. The court will then consider the needs of all creditors and the petitioner before making the order. If the court grants the administration order, a ‘moratorium’ is created which will ‘stay’ or stop any legal action being taken against your business, including the winding up petition, and prevent a winding up order being made. It will also prevent further interest and charges being added to the original debt.   

Pre-pack administration or CVA

The administrator may then propose a Company Voluntary Arrangement (CVA) to protect the business and allow for the repayment of its debts over a period of up to five years. Alternatively, if a CVA is not suitable, the company may be sold to a new business or to the existing company directors who may choose to buy the company’s assets using their personal funds.    

Need Advice?

If you’ve received a winding up petition or are being threatened with one, you should seek advice as soon as possible. At AABRS, we have significant experience with dealing with insolvent companies and can advise you about the possible steps that you can take. Call Simon Renshaw on 0208 444 2000 for an initial telephone discussion.

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