If a creditor has issued you with a winding-up petition, it’s impossible to overstate just how serious this situation is. If you fail to act, a winding-up order could be made to liquidate your business in a matter of weeks. This will result in the company’s assets being sold for the benefit of your creditors, and the business will be closed.
However, there are still a number of opportunities available to save your business, but you must act IMMEDIATELY. As well as having the power to make a winding up order, the court can also decide to adjourn the hearing if it believes the company will pay the debt if it is given more time. Alternatively, the debt itself, or the amount owed, may be in dispute. The winding up court does not try that dispute. If the debt is genuinely disputed on substantial grounds, the company can ask the court to restrain the petition, ideally before it is advertised, or to dismiss it. If only part of the debt is disputed and the undisputed part is over £750, the petition can still go ahead.
In what circumstances may an adjournment be sought?
If the court is going to adjourn a winding up petition it will need a good reason to do so. The court may adjourn if there is credible evidence, such as confirmed funding or a formal proposal, that the debt will be paid. It has a discretion, takes account of the views of the petitioning and other creditors, and often refuses or grants only a short adjournment. However, you will need the assistance of a solicitor or an insolvency expert and documentary evidence to fight your corner.
- If funding can be arranged – It is possible for the debtor company to ask that the petition is adjourned to enable funding to be arranged to repay the creditor, or to establish the correct position of the debt. In this case, the court may allow a short adjournment for these matters to be resolved.
- To propose a company voluntary arrangement (CVA) – If the company cannot pay off the whole debt before the petition hearing, but you are determined to repay the debt and continue trading, you may be able to adjourn the hearing by proposing a CVA. In this case, presenting a draft CVA to the court can be enough to prompt an adjournment.
- To appoint an administrator – Another way to deal with a winding up petition is administration. While a court application for administration is pending, no winding-up order can be made. If the court then makes an administration order, a creditor’s petition is dismissed; an appointment by a lender holding a qualifying floating charge suspends it instead. This route needs care: under Schedule B1 of the Insolvency Act 1986, the directors’ own out-of-court route to appoint an administrator is not available once a winding-up petition has already been presented and is still undisposed of. In that situation an administrator can usually only be appointed by the court, and the interim protection a notice of intention to appoint would otherwise create does not apply in the same way. This route needs specific legal advice for that reason — it is not a simple filing that automatically stops the petition.
Want to Talk?
If a winding up petition has been served on your company, the company is 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 0208 444 3400.