When a company cannot pay its debts, any creditors who are owed more than £750 can present a winding up petition to close the company down and liquidate its assets. However, given the severity of the consequences, the company that receives the winding up petition will usually do everything it can to repay the petitioning creditor. If it repays the debt in question, the creditor can ask the court for permission to withdraw the petition, or ask the court to dismiss it at the hearing. Paying the petitioning creditor does not by itself remove the threat of liquidation. Where the petitioner agrees to withdraw the petition or to have it dismissed, the court may substitute another creditor who wants to pursue it. The early withdrawal route, before the petition is advertised and before any other creditor has given notice, avoids substitution in practice. Neither withdrawal nor dismissal stops another unpaid creditor presenting a fresh petition. Payments the company makes after the petition is presented are also void if a winding up order is made, unless the court validates them.
How do you withdraw a winding up petition?
- The first step, as the petitioning creditor, is to agree the settlement with the debtor company in writing and obtain its consent to an order withdrawing the petition. The written agreement should state the creditor’s intention to withdraw the petition once the debt is paid.
- Once a settlement has been agreed with the debtor and the payment has been received, you should notify the debtor in writing that the payment settles the debt and that you intend to withdraw the petition.
- The next step is to apply to the court for permission to withdraw the winding up petition. You must apply at least five business days before the first hearing. The court gives permission only if it is satisfied that the petition has not been advertised, that no one has given notice that they intend to support or oppose it, and that the company consents to the withdrawal. You will have to show the court that each of these conditions is met. If any of these conditions is not met, or the five-business-day deadline has passed, this route is closed. The petitioner must instead ask the court at the hearing to dismiss the petition or allow withdrawal, and other creditors may apply to be substituted as petitioner.
- Finally, the court’s order granting permission is what withdraws the petition, so no further letter to the court is needed. The company should keep a copy of the sealed court order as proof that the winding up petition has been withdrawn.
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 0208 444 3400 for an initial telephone discussion.