Winding Up Petition

A Winding Up Petition is a creditor-driven attempt to force a firm into Compulsory Liquidation.
A serious threat, it shouldn’t be taken lightly. However, there's no need to fear - Hudson Weir can help.

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What is a Winding Up Petition?

A Winding Up Petition is a serious threat to a company which aims to force it into Compulsory Liquidation.

It can be issued by a creditor who is owed £750 or more and results in the company ceasing to trade.

Essentially, the creditor starts a legal process in an attempt to “wind the company up” so they may recover their outstanding debt.

A Winding Up Petition is applied for via the court and usually comes after a creditor has lost faith in the company and given up on trying to claim their money back in other ways.

Directors failing to keep payment promises, bouncing cheques, and unresolved county court orders or statutory demand documents might knock a creditor’s confidence.

As a result, they may threaten the company with a Winding Up Petition.

It’s a costly process for a creditor. They must pay an in-court deposit of £1530 plus filing fees and between £400 and £800 to issue the petition.

It is not a threat to be taken lightly – it is a serious attempt at legal action against a company.

What happens after a Winding Up Petition is issued?

1

Once the petition is issued, the company and its assets cannot be sold on and it can no longer be placed into Creditor Voluntary Liquidation without the approval of the creditor.

2

A time and date will be set up by the court for a hearing of the petition which will be served by the creditor to the company within 14 days of the hearing.

3

Seven days prior to this, the creditor will advertise the issuing of the petition in the London Gazette.

This could lead to other creditors endorsing it and using it as leverage to make their own claims.

4

If the directors do nothing, the Hearing will take place. If the creditor wins, the company will be forced into Compulsory Liquidation.

What is Compulsory Liquidation?

Compulsory Liquidation is generally thought to be the least favourable outcome and is best avoided.

This is because when a company is placed into Compulsory Liquidation, overall costs are higher and company assets have to be sold on.

Staff members are all made redundant and the company is ultimately struck off the register.

If threatened with a Winding Up Petition, we cannot stress enough how important it is that a company acts immediately.

Advice from Hudson Weir is invaluable and can make a huge difference to any organisation facing this situation.

A Winding Up Petition also leads to the company bank account being frozen

The company’s bank account is frozen immediately after the bank realises the petition has been issued.

The petitioning creditor will advertise the petition in the Gazette seven days prior to the hearing and the bank will freeze the company account at this point.

This means it will no longer be able to pay its staff members, suppliers or anybody else. The petitioning creditor and other company creditors will go unpaid as well.

The bank freezes the company account as a means to protect itself in case the firm is liquidated.

To unfreeze this account the company must apply for a Validation Order via the court.

Applying for a Validation Order

A company should only ever apply for a Validation Order if it is 100% certain that the Winding Up Petition should be dismissed.

For a Validation Order to be granted, the business needs to convince the court that unfreezing their bank account benefits it and its creditors as well.

The Validation Order application is made to the court in which the petition hearing will take place and is served upon the petitioning creditor.

It asks the court to unfreeze the company’s bank account and requires solid evidence to back up all the points it makes. This might include:

  • Why the directors believe the petition was issued
  • Whether the petitioning creditor’s debt is disputed, and if so, why? If not, an explanation of how the company will pay needs to be provided
  • A rundown of the company’s financial situation. This needs to include a comprehensive assets list that details the cost of all assets, the cost of security for these assets and a liabilities list. All this must be backed up with documentary evidence such as audits and management accounts
  • A cash flow forecast
  • A profit and loss projection

The Validation Order has a stronger chance of court approval if the company can pay all its due debts from the bank account that has been frozen.

Similarly, if the Winding Up Petition is going to be dismissed or if a Company Voluntary Arrangement is likely to be approved by the creditors, the Validation Order claim stands a better chance of going through.

If the company disputes the debt, what action must be taken?

The company needs to inform the court, the petitioning creditor and the petitioning creditor’s solicitor formally.

Reasons for why the debt is being disputed have to be included in this.

If the petitioning creditor refuses to withdraw the Winding Up Petition, a defence from the firm must be sent to the court at least five days before the hearing date.

This defence should include supporting evidence. If part of the petitioning creditor’s claim is agreed to, it is best to pay this off before the hearing.

The court will assess the facts and might grant an adjournment of the hearing so that there is more time for both parties to resolve the dispute.

If the company has applied for it, the court may also grant an injunction which stops the issuing of the petition being advertised in the London Gazette. However, the court can also give the order to wind up the company at this stage.

If the dispute goes unresolved before the hearing, company directors will have to defend the petition at the hearing in court.

If the company has applied for it, the court may also grant an injunction which stops the issuing of the petition being advertised in the London Gazette. However, the court can also give the order to wind up the company at this stage.

If the dispute goes unresolved before the hearing, company directors will have to defend the petition at the hearing in court.

What to do if you are issued with a Winding Up Petition

Seeking professional advice immediately is the undoubtedly the first thing to do. The sooner the better!

Getting advice while the petition is being threatened is easier than seeking it after it has been issued because more options are available to the business.

Don’t worry though – our team at Hudson Weir will help you out regardless of what stage in the process you are at.

Hudson Weir will take into account your current situation and discuss with you the best options available and how best to proceed.

We can then provide you with the documents that state we are working for you formally. This is part of the legal process in hiring a consultancy firm to act on a company’s behalf.

We work with you to create an action plan that aims to achieve your objectives and get you the best possible outcome.

Do not pay off the petitioning creditor without receiving professional advice from us.

This may lead to you losing money to the creditor and the Winding Up Petition still not being dismissed.

Any other creditors who are using the petition as leverage for their own claims also need to be dealt with and Hudson Weir can help with this too.

We will meticulously and efficiently investigate your situation and deal with any issues you are up against.
We are more than happy to help if you have found yourself in the situation of either being threatened with a Winding Up Petition or have received one.

Next step

We are more than happy to help if you have found yourself in the situation of either being threatened with a Winding Up Petition or have received one.

We will sit next to you at the table and stand by you.

If you are thinking about a Winding Up Petition, all you need to do is get in touch with Hudson Weir.

Call us on 020 7099 6086 or

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Hudson Weir are an established firm of Insolvency Practitioners who specialise in business recovery and corporate financial solutions. Hudson Weir provides industry leading, nationwide services for its clients with the intention of easing financial pressures and providing recovery strategies for struggling businesses.

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Hudson Weir Ltd (Company number 09477593) is a company registered in England and Wales.

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