If your company bank account has been frozen because of a winding up petition – we can help. A validation order application is normally the best way to proceed, allowing use of the bank account and to continue trading - plus avoiding the risk of personal liability as well. We have been helping businesses since 2002. Let our team of experts help you too.
Validation Order Application Guide
A validation order allows the company to legally make business payments despite the winding up petition having been issued at court. Winding up petitions are usually issued by creditors of the company often stating that the company is unable to pay its debts (section 122(g) of the Insolvency Act 1986). The definition of inability to pay debts is set out in section 123 of the Insolvency Act 1986.
Winding up petitions can be defended – and a validation order is a great way to give a company the breathing space it needs to keep trading and resolve the issues it has. Our brilliant team is here to help. CALL US TODAY FOR A FREE CONSULTATION.
- The dangers of not applying for a validation order
- How do you apply for a validation order?
- What to do before you apply for a validation order
- What to do if the situation is very urgent – Interim help
- When to apply for a validation order
- How is a validation order served
- Where is the validation order applied for?
- Validation order application process
- Obtaining a validation order
- So, practically – how do you apply for a validation order?
- Validation order costs
- Other expert help at Francis Wilks & Jones
The dangers of not applying for a validation order
Failure to apply for a validation order can cause significant issues if the company is later wound up.
- Certain “dispositions” of company property can be set aside pursuant to s 127 of the Insolvency Act 1986
- Directors can be made personally liable for company losses and face claims from liquidators and face Insolvency Service investigations.
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How do you apply for a validation order?
If your company bank account has been frozen because of a winding up petition – we can help. A validation order application is normally the best way to proceed, allowing use of the bank account and to continue trading – plus avoiding the risk of personal liability as well.
- an application for a validation order needs to be made pursuant to the detailed procedures set out in Rule 9.11 of the Practice Direction on Insolvency Proceedings.
- this application takes legal expertise to draft and there is little point attending a validation court hearing without having properly set out the information the court requires. The court is very careful to ensure that the order is properly granted and won’t allow payments out of a frozen bank account without being properly satisfied.
OUR EXPERTS WILL MAXIMISE THE CHANCES OF SUCCESS AT COURT.
What to do before you apply for a validation order
The following steps must be taken before applying for a validation order
1. Notify all relevant parties first
Other than in exceptional circumstances, you will need to notify the following parties that you are applying for a validation order (Rule 9.11.2 of the Practice Direction on Insolvency Proceedings):
- the person who filed the winding-up petition (the respondent) (Rule 9.11.2(a) of the Practice Direction on Insolvency Proceedings);
- any person entitled to receive a copy of the petition (Rule 9.11.2(b) of the Practice Direction on Insolvency Proceedings);
- any creditor who has given notice to the petitioner of his intention to appear on the hearing of the petition (Rule 9.11.2(c) of the Practice Direction on Insolvency Proceedings); and
- any creditor who has been substituted as petitioner (Rule 9.11.2(d) of the Practice Direction on Insolvency Proceedings).
2. Prepare a detailed witness statement to support your application
Your application should be supported by a witness statement which is normally made by a director or officer of the company who is intimately acquainted with the company’s affairs and financial circumstances. If appropriate, supporting evidence in the form of a witness statement from the company’s accountant should also be produced. (Rule 9.11.3 of the Practice Direction on Insolvency Proceedings)
The extent and contents of the evidence will vary according to the circumstances and the nature of the relief sought, but in the majority of cases it should include, as a minimum, the following information: (Rule 9.11.4 of the Practice Direction on Insolvency Proceedings)
- when and to whom notice has been given (Rule 9.11.4(1) of the Practice Direction on Insolvency Proceedings);
- the company’s registered office (Rule 9.11.4(2) of the Practice Direction on Insolvency Proceedings);
- the company’s nominal and paid-up capital (Rule 9.11.4(3) of the Practice Direction on Insolvency Proceedings);
- brief details of the circumstances leading to the presentation of the winding-up petition (Rule 9.11.4(4) of the Practice Direction on Insolvency Proceedings);
- how the company became aware of the presentation of the petition (Rule 9.11.4(5) of the Practice Direction on Insolvency Proceedings);
- where the petition debt is admitted or disputed and, if the latter, brief details of the basis on which it is disputed (Rule 9.11.4(6) of the Practice Direction on Insolvency Proceedings);
- full details of the company’s financial position, including details of its assets (including details of any security and the amount(s) secured) and liabilities, which should be supported, as far as possible, by documentary evidence, eg the latest filed accounts, any draft audited accounts, management accounts or estimated statement of affairs (Rule 9.11.4(7) of the Practice Direction on Insolvency Proceedings);
- a cash flow forecast and profit and loss projection for the period for which the order is sought (Rule 9.11.4(8) of the Practice Direction on Insolvency Proceedings);
- details of the dispositions or payments in respect of which the order is sought (Rule 9.11.4(9) of the Practice Direction on Insolvency Proceedings);
- the reasons relied on in support of the need for such dispositions or payments to be made (Rule 9.11.4(10) of the Practice Direction on Insolvency Proceedings);
- any other information relevant to the exercise of the court’s discretion (Rule 9.11.4(11) of the Practice Direction on Insolvency Proceedings);
- details of any consents obtained from the persons mentioned above (supported by documentary evidence where appropriate) (Rule 9.11.4(12) of the Practice Direction on Insolvency Proceedings); and
- details of any relevant bank account, including its number and the address and sort code of the bank at which such account is held and the amount of the credit or debit balance on such account at the time of making the application (Rule 9.11.4(13) of the Practice Direction on Insolvency Proceedings).
3. Get an independent valuation for certain assets
Where the validation order application involves a disposition or sale of property, the court will need details of the property (including its title number if the property is land) and to be satisfied that any proposed disposal will be at a proper value. Accordingly, an independent valuation should be obtained and included in the validation order evidence. (Rule 9.11.6 of the Practice Direction on Insolvency Proceedings)
4. Demonstrate the company is solvent
The court will need to be satisfied by credible evidence either that the company is solvent and able to pay its debts as they fall due or that a particular transaction or series of transactions in respect of which the order is sought will be beneficial to or will not prejudice the interests of all the unsecured creditors as a class (Rule 9.11.7 of the Practice Direction on Insolvency Proceedings).
5. Prepare a draft validation order
A draft of the validation order sought should be attached to the application (Rule 9.11.8 of the Practice Direction on Insolvency Proceedings).
Similar considerations to those set out above are likely to apply to validation order applications seeking ratification of a transaction or payment after the making of a winding-up order.
What to do if the situation is very urgent – Interim help
Where a validation order application is made urgently to enable payments to be made which are essential to continued trading (eg wages) and it is not possible to assemble all of the evidence listed above, the court may
- consider granting limited relief for a short period.
- however, there will need to be sufficient evidence to satisfy the court that the interests of creditors are unlikely to be prejudiced by the validation order application (Rule 9.11.5 of the Practice Direction on Insolvency Proceedings).
When to apply for a validation order
A validation order can be applied for either before or after company assets have been disposed of / sold or company money used to pay for goods or services.
1. Applying for a validation order pre disposition of assets / company money
If the validation order application is made before a company’s assets have been disposed of, an “antecedent” validation order is required. The court will only grant it if:
- The company is solvent and able to pay its debts as they fall due; or
- The transaction or transactions to be validated will be beneficial to or will not prejudice the interests of all of the unsecured creditors as a class.
2. Applying after disposition of assets / company money
If the application is made after a disposition of the company’s assets, a “retrospective” validation order is required. Here the court will balance the interests of the recipient of the property with the interests of the company’s creditors at large. It is likely to grant the order in circumstances where the dispositions were made in good faith and before either the company or the recipient became aware of the winding-up petition.
- when considering an application for a retrospective validation order, the court, in determining whether to grant it, will seek to balance the interests of the recipient of the property in question with the interests of the company’s creditors.
- however, there is no guarantee that the order will be granted, even in circumstances where the disposition was made both in good faith and before either the company or the recipient became aware of the existence of the winding-up petition;
- it is therefore very important to take specialist advice when considering applying for a retrospective validation order.
In accordance with rule 12.2(2), in the Royal Courts of Justice an officer acting on behalf of the operations manager or chief clerk has been authorised to deal with applications ((Rule 10.1 of the Practice Direction on Insolvency Proceedings).
How is a validation order served?
The application and evidence will need to be filed at court and served on the respondent as soon as practicable after it is filed and, in any event, unless it is necessary to apply ex-parte (ie no notice given to any other affected party) or on short notice, at least 14 days before the date fixed for the hearing.
Applications for validation orders should be served on:
- the petitioning creditor;
- any liquidator appointed in an existing voluntary liquidation;
- any administrator appointed in an existing administration order;
- any supervisor of a voluntary arrangement;
- any administrative receiver;
- any member state liquidator who has been appointed;
- the Financial Conduct Authority;
- any creditor who has given notice to a petitioner of his intention to appear on the hearing of the petition pursuant to Rule 7.14 of the Insolvency (England and Wales) Rules 2016; and
- any creditor who has been substituted as petitioner pursuant to Rule 7.17 of the Insolvency (England and Wales) Rules 2016.
The court does have power in cases of urgency to hear an application immediately with or without notice to the other parties.
The application may be sent by post provided it is addressed to the person it is to be served on. It may be sent to the last known address of the person to be served.
Where is the validation order applied for?
An application for a validation order should be made to the same court that is dealing with the winding-up petition. For the high court, the order application is made to the Registrar; for county courts, it is made to the District judge.
In certain circumstances, the validation order application is made to the judge:
- where it is urgent and no registrar or district judge is available to hear it;
- where it is complex or raises new or controversial points of law; or
- the hearing is expected to last longer than 30 minutes
Validation order application process
The validation order process normally follows a similar pattern:
- we will sign you up as a client and then review all relevant documentation, background about your company, details of the winding up petition and why it is you need to make the various payments from the company bank account and have court validation for these.
- we will then put together a draft witness statement setting out these facts for the benefit of the court. You will then agree this and sign it off and then we will then issue a formal application to the court for a validation order hearing.
- the papers will then be served on the relevant interested parties.
- there will then be the hearing at court. At that validation order application, the court will listen to the barrister instructed on your behalf to understand why, despite a winding up order being in place, various payments should be allowed to be made – eg to creditors suppliers or employees.
- if the court decides to grant the order, it will make a validation order there and then and then that can be served on the relevant parties. The company will then be entitled to make the payments sanctioned by the court.
There can be nuances and variations within this validation order process but ultimately, the expert validation orders team at Francis Wilks & Jones has experience in a wide range of validation order applications meaning that it is highly unlikely to be surprised by anything which comes its way.
We have brilliant success rates in dealing with frozen bank account scenarios, helping companies unfreeze company bank accounts, unfreeze assets, have winding up orders reversed and allow a company to continue trading despite a winding up order being in place. we are the experts who can help your business through this difficult period.
Obtaining a validation order
In order to obtain a validation order, you will need to prepare a witness statement setting out in sufficient detail why it is you are seeking a validation order and dealing with all of the areas which a court will expect to see before granting such an order. Commonly, these relate to the financial affairs of the company, its future prospects and will refer to the accounts position and the overall financial viability.
- at Francis Wilks & Jones, we have a team of experts in our validation orders team who can take you through this process;
- our job is to work with you to obtain the information needed to prepare the witness statement evidence and set it out in a manner the court requires;
- obtaining a validation order also needs the validation order application notice preparing and e-filed at court with the appropriate court fee. This is something that our validation order team can also sort out.
Finally, any validation order application requires a specialist validation order barrister to attend on your behalf who is familiar with these types of applications as that person will need to present the evidence to the court in such a manner that the court understands and help convince the court to give the order which we want.
So, practically – how do you apply for a validation order?
Whilst it is relatively straightforward it is not something we would recommend you undertake without legal assistance. The provisions of the Practice direction (and the dangers in Section 127 of the Insolvency Act 1986 ) relating to validation orders are detailed and a court will not make an order without being satisfied that it is appropriate to do so.
- a party applying for a order must issue an application notice which is then e-filed at court;
- that application notice is supported by a witness statement normally made by a director or officer of the company who is very familiar with the affairs of the company and particularly the financial affairs of the company;
- there are a number of areas that will have to be completed in the witness statement for the benefit of the court including
- details about the company;
- its paid up capital;
- background as to the circumstances leading to the application;
- details of when the company became aware of the winding up petition; and
- full details of the company’s financial position, cash-flow forecast and details of why the payments need to be made to the various parties.
Without setting out this information in proper detail, the validation order stands little chance of success.
The validation orders team at Francis Wilks & Jones work with our clients to prepare the relevant evidence required for the validation order hearing and we also work closely with a validation order barrister who will present the evidence on the day.
Our team approach is reflected in our brilliant track record of obtaining validation orders for our clients. Let us help take the stress out of the situation and keep you trading.
Validation order costs
There are three main areas of costs when making a validation order application:
- the validation order court issue fee. The validation order court fee is currently £95 and needs to be paid in order to have the validation order application issued at court.
- a barrister’s fee for the validation order hearing. Depending on the urgency of the matter, a barrister’s fee for a hearing can range between £750 – 1,500. This is to deal with standard validation order applications. More complicated structures or dealing with group company situations can be more expensive.
- the final element is our own legal fees. We are able to advise you on the validation order costs of our legal fees once we have spoken to you and understood the detail and nature of the validation order application that is appropriate to your company.
Other expert help at Francis Wilks & Jones
Winding up Petition expertise
At Francis Wilks & Jones, we our winding up petition team have a brilliant track record of
- Negotiating Settlement of Winding Up Petition
- Delaying or postponing winding up court hearing
- Withdrawal or dismissal of the winding up petition from the court
- Advertisement in the London Gazette
- HMRC winding up petitions
- Disputed winding up petitions
- Injunctions to stop the issue or advertisement of the petition
Our specialist Director Defence team has been helping directors since 2002. We can assist with issues such as
- Bounce Back Loan Defence
- Advising on Director Duties
- Defending Personal Claims against Directors by Liquidators
- Director Disqualification
Our expert company rescue and turnaround team can help with the following
- Company rescue
- Insolvency & Restructuring Advice
- Company Voluntary Arrangements
HMRC and Tax Disputes
Our team is headed by Andy Lynch who spent 18 years at HMRC before joining FWJ to help defend companies and directors.
- HMRC winding up petition defence
- HMRC Investigations
- R&D Tax Credit investigations
- PAYE and VAT Security Notices
- Loan Charges
- Time to Pay Agreements
Call us today for immediate help
We know that a winding up petition and frozen bank account situation can be very scary for a company, but we have dealt with many situations involving a frozen bank account and successfully allowed the company to continue trading. We can help alleviate the stress for you.
Our brilliant team of experts can help you with all types of winding up petition needs – including the vitally important need for a validation order.
If there was ever a star rating for law firms, Francis Wilks & Jones would score five stars plus. Professional and pro-active, they were able to understand my problem quickly, provide expert advice, outline a solution and put it into place with a successful outcome. I should have gone to them sooner.A company director
I was delighted by the work done by the team at FWJ and cannot recommend them highly enough. Their legal and tactical knowledge was spot on. I can now continue to grow my business free from worry.A company director