If a creditor has brought a winding up petition against you, don’t despair, there are legal defences available to you to prevent your company from being wound up and stop the winding up petition in its tracks.
These range from showing that you can pay the creditor and that the company isn’t insolvent, to demonstrating that the debt is disputed.
If you have had a winding up petition filed against your company, the defences available to you will vary depending at which stage in the compulsory liquidation process you are at. We’ve broken down the defences available to you at each stage of the process.
There is a very narrow window of opportunity to take action to stop a winding up petition, however, so we strongly recommend you call us at the earliest opportunity for a free consultation.
- 5 Ways to Stop a Winding up Petition Not Yet Advertised
- Pay off the Creditor
- Dispute the Debt
- Enter the Company into Administration
- Agree on a Company Voluntary Arrangement (CVA)
- Negotiate with the Creditor so That They Don’t Advertise
- 4 Ways to Stop a Winding up Petition that has been Advertised in The Gazette
- Stopping a Winding up Petition at the Court Hearing
- Options to Stop a Winding Up Order that’s already been Issued
- How to Avoid a Petition becoming an Order?
5 Ways to Stop a Winding up Petition Not Yet Advertised
Once the Winding up Petition is advertised in the London Gazette, it can worsen your scenario in a number of ways. More creditors may start to exert legal pressure, plus the banks typically freeze business bank accountsTrusted Source – Legislation- Insolvency Act 1986, Section 127 meaning your ability to conduct business is severely hampered.
Pay off the Creditor
If you pay off the creditor (in addition to their costs of bringing the petition) prior to its being advertised in The Gazette, you should be able to halt the petition getting into the public sphere.
Dispute the Debt
If the existence or the amount of the debt is disputed, you can inform the courts that this is the case. Only take this step if you have evidence, as to do so falsely will be misleading the courts and can have very serious consequences.
Enter the Company into Administration
Companies in administration are subject to a moratorium that stops creditors from winding them up or bringing legal proceedings against them.
Agree on a Company Voluntary Arrangement (CVA)
75% of the company’s creditors must agreed to approve the CVA
Negotiate with the Creditor so That They Don’t Advertise
Once the petition is advertised in The Gazette, banks normally freeze the company’s bank accounts, which can often mean the end of the company as it is no longer able to trade.
Request that the courts adjourn or cancel the winding up hearing. You will need to make a separate application for this and file a statement explaining why they should do so.
4 Ways to Stop a Winding up Petition that has been Advertised in The Gazette
After this point, your options are much more limited. You can:
- Dispute the debt.
- Negotiate a CVA with the company’s creditors.
- Apply for a Validation Order. While this isn’t a defence per se, if successful, it will unfreeze the company’s bank accounts and allow you to implement other steps as necessary.
- Enter the company into administration.
- Request that the courts adjourn or cancel the court hearing.You will need evidence to support these requests.
Stopping a Winding up Petition at the Court Hearing
Show that the company can pay the creditor and is not insolvent. You will need to substantiate this with evidence.
Options to Stop a Winding Up Order that’s already been Issued
Apply for a Rescission Order
You can apply to rescind the winding up the order within five business days of the order being made if you can demonstrate that the company can pay the creditor or you couldn’t attend the winding up hearing. The court will hold another hearing to decide whether to rescind the winding up order.
Apply for an Administration Order.
An Insolvency Practitioner (IP) appointed by the company can apply for an Administration Order which effectively overrides the winding up order and allows them to be appointed as administrator.
Apply for a Stay of Proceedings.
This won’t reverse the winding up order but will stay its effect for a set period. The court can also order a permanent stay of proceedings, which puts the winding up order permanently on hold. The courts will order a stay of proceedings where you have agreed on a CVA with the company’s creditors.
How to Avoid a Petition becoming an Order?
Once a winding up petition has been issued, you may be able to avoid the company being subject to a winding up order. Time is very much of the essence here: the sooner you take action after receiving the petition, the better your chances are of avoiding a winding up order.
Seek professional advice as soon as you receive a winding up petition – there are a number of steps you can take within the first seven days after receiving the petition that can stop the situation from worsening. These include:
- Paying off the creditor who has brought the petition (including their costs of bringing the petition).
- Negotiating a Company Voluntary Arrangement.
- Disputing the existence or the amount of the debt. You should only do this if you have concrete evidence to show that the debt is incorrect.
- Entering the company into administration.
- Speaking to the creditor to try and persuade them not to advertise the winding-up petition. Once the petition is advertised the company’s bank accounts and assets will be frozen. Delaying the advertisement of the petition can give you more time to get the company’s finances in order.
- Submitting a request to the courts that they adjourn or cancel the hearing of the winding up petition.
Once seven days has elapsed after the winding up petition has been issued, it is highly unlikely that you will be able to stop the process, which will end with your company being wound up. It’s imperative that you take action quickly.
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