Winding up petition guide

Normally it can take around 8-10 weeks to wind up a company. We can help guide you through the process, whatever side you are on.

There are a number of steps which have to be carried out as part of the normal winding up petition process:-

Making a search of the winding up petition register at court

We undertake a winding up petition search at court to ensure that there is not already a winding up petition in existence. This is because there can only be one petition at any time.

Drafting the Winding up Petition and supporting witness statement

The winding up petition then needs to be drafted with all the relevant information and in addition, we need to draft a supporting witness statement.

Issuing the Winding up petition at court

Once the winding up petition and statement are ready to apply for a winding up petition will need to be issued at the appropriate court.  We always issue out of the Companies court in the High Court of Justice, London. We can do this the same days as instruction as we are very near the court.

Service of the Winding Up petition

After issue of the winding up petition by the court, we can arrange for it to be served by a process server – part of the requirements of the winding up petition serving process

Advertising the winding petition in the London Gazette

If the winding up petition debt remains unpaid or undisputed, then in order to wind the company up, the winding up petition needs to be advertised in the London Gazette.  This can happen as little as 7 business days after the date of service.

Preparation for winding up court hearing.

To wind up a company, certain documents need to be prepared and filed in advance of the hearing. These include the certificate of compliance, a certificate of continuing debt and a copy of the affidavit of service. 

Attendance at the hearing

To wind up a company, you will need representation at the court hearing to seek a winding up order, (although at present all hearings are done virtually due to Covid). The hearing date is usually 8-10 weeks after the date the winding up petition is issued. On occasion a director of the debtor company may attend and try and argue against the winding up order being made. Therefore it is important to have proper legal representation at the hearing.

The importance of understanding key time limits

The following are key winding up petition time limits which either party to a winding up petition should bear in mind:

• winding up petition service. Following the issuing of a winding up petition at court, the petition should be served as reasonably quickly as practicable.
• winding up petition advertisement. A winding up petition advertisement in the London Gazette can only take place 7 business days after the petition has been served. That does not include the day of service. It also does not include weekends. This is a very important date for either party. It is especially important for the defendant as failure to understand this point can lead to the winding up petition advertisement in the London Gazette following which that spells disaster for most companies as it becomes public knowledge.
• if a company is to be wound up, then all supporting documents such as the winding up petition advert, certificate of indebtedness, notice of appearances, winding up notice etc. must be lodged at court 7 working days before the date of the winding up petition hearing. If they are not, then the court will not wind the company up at that hearing and could even lead to winding up petition dismissal.

If you are the creditor / petitioner

If you are the creditor who has issued the winding up order, the following should be taken in to account

• you will receive the sealed winding up petition back from the court ready for service. The winding up petition will show the court date when the matter is back in the winding up petition court, commonly 8-10 weeks after the date of issue (although Covid is slowing matters down);
• you will then need to arrange for service of the winding up order on the registered office of the company. This is normally done by a process server experienced in service of winding up orders;
• Once the winding up order has been served, the debtor will either get in touch to arrange for payment, ask for further time to pay or dispute the debt either partially or entirely. When faced with these choices, the creditor will do a number of different things
  • If the debt is paid then the creditor normally wants to withdraw the winding up petition to safeguard the money it has been paid;
  • If the debt is disputed the creditor needs to work out whether the dispute is a genuine one or whether it only covers part of the outstanding monies or not. The matter can then rapidly become quite complex if the debtor is threatening an injunction to prevent the advertisement of the winding up petition.
• If no response is received from the debtor, the creditor can arrange for the winding up order to be advertised in the London Gazette. The winding up order then becomes public knowledge. In the continuing absence of payment of the debt, the creditor will file certain documents at court in advance of the court hearing. So long as this is done properly, at the hearing, the court will make the appropriate winding up order and the company is placed into liquidation.

If you are the debtor

If you are a debtor who has received a winding up petition, then you should consider the following

• the petition is served at your registered office. Sometimes the registered office is different to the trading address of a company and can be an accountant’s office. It is very important that if your registered office is different to your trading address, then any post which is sent to your registered office is forwarded or notified to you upon receipt. Sometimes we are instructed by companies who have been unaware of the winding up petition and the first they know about it is when it is advertised in the London Gazette;
• as a debtor you then have a series of choices
  • You pay the full debt (or negotiate payment terms);
  • You pay part of the debt and set out reasons why the balance isn’t being paid;
  • You dispute the entire debt and if the petition isn’t withdrawn, seek an urgent court injunction to stop it being advertised in the London Gazette;
  • If you are insolvent or do not believe that you can pay your debts as demanded, then you can simply let the winding up order go through or alternatively we would recommend you take some restructuring or insolvency advice to see if there are other options available to help save the company.

What happens if the winding up order is made by the court?

It is important to understand what happens after a winding up order is granted. This isn’t the end of the matter for the individuals involved as directors or managers of the debtor company. The liquidator will make investigations into the running of the company and this can end up resulting in personal claims against the directors and/or managers.

A winding up petition is a legal claim brought by a creditor of the company (usually) who has not been paid their outstanding debt. They will apply to the court to wind up the company so that the company’s assets can be used to pay creditors.

What happens once a winding up petition is served on me?

If you have received a winding up petition, then this will have already been issued in court by your creditor. The court will have provided a date for the hearing of the winding up petition, which will be detailed in the petition that you received.

• the winding up petition will be advertised in the London Gazette, although this will not happen until at least 7 business days after you have been served with it;
• the advertisement of the winding up petition can have devastating consequences a company including
  • the bank putting a freeze on the company bank account
  • suppliers and customers being on notice that the company may be wound up and therefore not supplying you with goods / services or buying form you.

What can I do?

If you agree that the debt is due then we would strongly advise paying the debt or reaching some sort of settlement as soon as possible after you have received the winding up petition and certainly before the creditor has an opportunity to advertise it in the London Gazette. This gives you 7 days from service.

• if you genuinely dispute the debt, then it is possible to make an application to court to prevent the advertisement of the winding up petition;
• you will have to act fast to do this;
• this would have to be on grounds that the debt is disputed and all evidence that you have that you have already notified to the creditor that this is disputed should be put forward.

If you wish to apply to restrain the advertisement of the petition, then you should take expert legal advice. The evidence must be presented in the best possible light and as quickly as possible. Our team of expert company liquidation lawyers at Francis Wilks & Jones can help.

We can also apply to court for a validation order to help you keep trading whilst you resolve the winding up order. This will lessen the risk of any later personal claims against the directors if the company is wound up.

It is possible to cancel a winding up order and have the petition removed. This is known as rescission and involves a court application. Our team are experts in this field and have made many rescission applications over the years. Call us today for help

“Winding up petition rescind” is a question which can relate to a number of different issues such as:

• how can a debtor remove the winding up petition after the petition debt is paid? It is possible to make an application to withdraw a winding up petition prior to the hearing date if a debt has been paid and the position of legal costs has been resolved. Our team can help you with this process and it is often vital to get the winding up petition removed from the court record as soon as possible so that banks and other creditors do not become aware of it;
   
• a debtor may want to have the petition dismissed because the winding up petition is defective and/or disputed. In these circumstances, you can rescind a winding up petition by sending a detailed letter to the petitioning creditor and/or its solicitors inviting them to have the petition withdrawn. If they refuse, you can apply to court to have the winding up petition dismissed and/or an injunction put in place to restrain advertisement of the winding up petition. Again, our team can assist;
   
• the creditor may wish to have the winding up order cancelled after payment of the debt and/or part payment of the debt. This is because it wants to safeguard its money and avoid the winding up petition being supported by another creditor. If this happens the petitioning creditor loses control of the winding up petition process and the company may still end up being wound up. If this happens, any money paid to the petitioning creditor would have to be paid back into the company in liquidation for distribution to all of the creditors of the company and not just the petitioning creditor.

Whatever the reasons, Francis Wilks & Jones can help you to cancel a winding up order petition and rescission.

The consequences of a winding up petition can be dramatic -both personally and for the company. Our specialist team can help you avoid the worst and make sure you limit and risk. Contact us today for your friendly advice.

The consequences of a winding up petition are varied but listed out below are some of the areas a debtor must take into account when served with a winding up order:

• disposition of company property being void. In layman’s terms, this covers a situation whereby selling of assets, spending of company money, charging assets etc after the date a petition has been presented can be invalidated by the court if the company is later wound up. This is pursuant to Sections 127(1) and 129(3) of the Insolvency Act 1986. Disposition of property after the date of a winding up petition can actually have serious effects on the directors of the company if a winding up order is granted by the winding up petition court. Indeed, a liquidator may seek to recover assets or property from directors by way of separate legal court action once a winding up order is made. There is a way around these difficulties and that is to seek what is known as a Validation order under Section 127 of the Insolvency Act. We can assist on this area.
• the bank may freeze the bank account. Having a bank account frozen is something which commonly happens after the presentation of a winding up order. This is because the bank does not want to be held responsible for monies leaving the bank account after the date the winding up petition was issued. Normally this only happens after winding up order advertisement in the London Gazette but it can happen beforehand if it becomes public knowledge in other ways. It can have a dramatic effect on the ability of a company to then pay its debts.
• damage to commercial reputation. The existence of a winding up petition can have great ramifications for a company and its commercial reputation. If it becomes known to suppliers of the company, they may cease to supply the company or ask for cash on delivery. It may also affect the bank’s ability to raise finance and/or impact greatly on its existing finance facility. Other companies may also seek to recover their debts from the company quicker than they previously have.
• lost management time. Dealing with a winding up petition can involve considerable management time. Whilst there is obviously a cost involved with taking expert legal advice, it can help save valuable management time and allow the directors of a company to concentrate on running the business rather than dealing with an unfamiliar and potentially dangerous area of the law. If you get it wrong, a winding up order could follow and that means the company goes in to liquidation.
• claims against directors by liquidators or administrators. If the company is would up – the former directors can face a range of serious personal claims by liquidators. These can result in having to pay money back to the company – or even director disqualification.

After a winding up order is made, a liquidator is appointed to try and get money back in to the company and also investigate the conduct of the directors – and bring personal claims if appropriate. We act for directors and liquidators and have fantastic skills in this area. Let us help you.

Once the winding up order is granted by a court, then the court appoints an Official Receiver over the company.

If there are very little assets in the company, then the Official Receiver may continue to oversee the case and act in the winding up until the liquidation has completed. However, if there are any assets of note to be collected in the company, it is more likely that the Official Receiver will appoint a liquidator to deal with the liquidation of the company going forward.

• in the case of a compulsory winding up, which is when a winding up petition has been presented to the court and the court has made an order for the winding up of the company, there is an automatic stay (stop) on legal proceedings against the company without the permission of the court.
• this only applies if there has been a compulsory winding up order granted by the court, and not if the company has gone into liquidation using the creditors voluntary liquidation route.

The liquidator

If a liquidator is appointed over the company, that liquidator will collect in all the assets of the company as part of the liquidation process, in order to use these to distribute to creditors and, if there is a surplus, to shareholders.

• the liquidator is a licensed insolvency practitioner who acts as an agent over the company. The directors’ role will automatically stop on liquidation, unless the liquidator says otherwise. They will act in the interest of all the creditors generally and are impartial and independent;
• the liquidator will liaise with creditors of the company in order to accept or reject proofs of debt. They collect in all the assets, and via liquidation sales will gather as much of the company’s property as possible in order to repay anyone owed by the company;
• the liquidator will deal with all issues relating to the company, such as outstanding leases, secured creditors, goods that are on the premises that are subject to retention of title clauses, the employees, a pension fund etc, and anything else that arises.

What happens after the liquidation?

Once the liquidator is confident that all the assets and the creditors have been dealt with appropriately, then they will apply to have the company dissolved at Companies House and taken off the Companies Register.

If you have been served with a winding up petition – it is vital to quickly assess the situation and take legal advice on how best to stop the petition proceeding. There are various options available and our expert team has helped 100’s companies successfully resolve a winding up petition situation. Let us help you.

There are a number of different ways to approach the question how to stop a winding up petition. Much will depend on the circumstances and even if you contest some or all of the debt, sometimes there are commercial considerations at play. The mere existence of a winding up petition can be hugely damaging to a company – reputationally and financially. Even if a petition is not formally advertised – banks can still find out about them and freeze a company bank account. This can have significant knock on effects for a company.

How can I stop a winding up petition?

Our experts regulalry advise companies facing winding up orders and having dealt with 100’s of these claims before, will know how best to resolve the situation for you.

Some of the options are as follows:

• Pay the debt due. It might sound obvious – but if the winding up order debt is undisputed, then the simplest way is to pay the winding up petition debt following which, the petition can be withdrawn from court. This is vital as it reduces the chances of it becoming a matter of public record and also stops the chances of the petition being supported by another creditor of the company. The debtor might have to sort out the legal costs of the winding up petition but this is a quick way of sorting out and stopping a winding up order being made. If you react quickly, are in a position to pay the debt – the petition can be withdrawn in as little as 24 – 48 hours from service.
• Dispute the winding up petition. If the winding up petition debt is disputed, then it is possible to obtain what is known as an interim injunction to prevent winding up petition. Winding up petitions should only be used where the debt is not subject to a dispute. The dispute has to be a genuine one. Alternatively, the debtor may have a cross claim which is higher than the amount being claimed on the winding up petition. If the petitioner refuses to withdraw the winding up petition in circumstances where it has been notified that the winding up petition debt is disputed, then the debtor can obtain an injunction which is a type of court order to prevent the winding up order being made at court. Legal advice is required for the injunction process as it is quite a significant application to be made in the winding up order court. The injunction will prevent the winding up petition being advertised in the London Gazette, something which commonly will spell the end to a business. The downside of this course of action is that the petition might stay on the court record until the injunction hearing takes place.
• If there are procedural defects in the winding up petition document then this can also lead to a winding up order being dismissed. There are strict rules relating to the winding up procedure and winding up company law and if these are not followed, it can lead to the winding up petition being dismissed.
• It is usually possible to agree a negotiated settlement of the petition debt – and if terms can be met, this might lead to an early withdrawal of the petition from court. It is always sensible to explore this possibility.
• If it isnt possible to immediately have the petition withdrawn but you still need to keep trading, we can help you apply to court for a validation order to allow payments to be made by the company and avoid the risk of personal money claims against the directors later on.

Sadly it isn’t always possible to pay the petition debt and if you are being chased by HMRC – they are renowned for taking a tough line in winding up petitions. In these circumstances, our company rescue team can provide advice on various restructuring options such as company voluntary arrangements or administration. Or if there is no other alternative, the right insolvency process and advice to the directors about how best to avoid any future claims from the liquidator or Secretary of State for director disqualification.

A company can try and reverse a winding up order if one is made – but must act quickly and with expert legal advice. Rescission applications must be made withing 5 days of a winding up order being made and require detailed evidence being put together to explain why the order should be overturned. We can help with this.

Rescission of the winding up order

Under Rule 12.59 of the Insolvency (England and Wales) Rules 2016, a company can ask for a winding up order to be rescinded. This means that the winding up order is cancelled. The procedure for the application to rescind the winding up order is set out at paragraph 11.7 of the Practice Direction on Insolvency Proceedings.

In summary:

• the application must be brought by a creditor of the company or a contributory of the company subject to the winding up order;
• the application must be made urgently – within 5 business days of the date of the winding up order. In limited circumstances that period can be extended but there would have to be a very good reason why;
• the application for the rescission of the winding up order must be supported by detailed witness statement evidence also detailing the company’s assets and liabilities.

The type of things the court will look at include whether the applicant can show that the circumstances of the company are materially different from the circumstances that applied when the court made the winding up order.

Put a stop to the winding up proceedings

Pursuant to Section 147 of the Insolvency Act 1986, the liquidation of a company can be halted by seeking a stay / stop of all proceedings in the winding up. The applicants can be a creditor contributory or a liquidator of a company subject to the winding up order. It is up to the court as to whether to grant the stay of winding up proceedings but it can do where for example the company is solvent or it is satisfied that it is in the public interest for a stay to be granted. It may also be stayed where the courts believe that another jurisdiction is better placed to deal with the proceedings.

Appeal the winding up order

The company may appeal a winding up order made against it pursuant to Civil Procedure Rule 52.11. However, this remedy is limited and can only take place on the basis that the decision was either wrong or unjust because of serious procedural or other irregularities.

There are different procedures to be followed depending on where the winding up order was made:

• where the winding up order was made by the Registrar of the Companies court, appeals must be made to the judge of the high court (Insolvency (Amendment ) (No.2) Rules 2016);
• where the winding up order was made by a judge or District judge in the county court, the appeal is to a judge in the high court (Insolvency (Amendment ) (No.2) Rules 2016).
• Where the winding up order was made by a judge in the high court, the appeal must be made to the Civil Division of the court of Appeal.

A shareholder who is aggrieved has a remedy to apply to wind up the company on just and equitable grounds under insolvency legislation. This is also referred to as a ‘contributory petition’ as it is brought by a shareholder.

The only remedy available, should an order be granted, is for the company to be wound up.

Despite this remedy being found under the Insolvency Act, the company should not actually be insolvent, and in fact anyone bringing a claim would need to show that there will be a substantial surplus on a winding up.

Circumstances for winding up

The circumstances for bringing a petition are similar to those of bringing an unfair prejudice petition under Section 994. Often the two remedies are bought at the same time and put as alternatives.

Because this amounts to such a draconian remedy for a company, effectively putting it out of business immediately, other remedies should be pursued before a claim for the just and equitable winding up of the company is pursued. A court will need to be very sure before it orders that a company be wound up following a dispute within the company.

Grounds for bringing the petition

These are similar to the grounds for unfair prejudice.

A claim may be brought if there has been a material failure of the company to abide by the Articles or a shareholders agreement, and this failure has amounted to unfairness by the majority against the minority.

Alternatively, the majority of the company may have been constrained by an equitable consideration that isn’t contained within the company’s paperwork but were part of general reasonable expectations of the shareholder, and the company has acted inequitably against these expectations and as a result has caused prejudice to the minority.

Examples of unfair prejudice or conduct that might lead to a just and equitable winding up are:-

• material breaches of directors’ duties that cause an unfair prejudice to minority shareholders.
• a lack of probity in the conduct of the company’s affairs.
• shares being transferred or allotted without complying with rights of pre-emption therefore prejudicing minority shareholders.
• minority shareholders who had a reasonable expectation to take some role in the management of the company being excluded from this.
• incompetence or commercial mis-judgement on the part of the board that prejudices the minority shareholders.
• decisions not to declare dividends as a matter of policy (not just because money needs to be used for the benefit of the company or that no profits have been declared).
• there is a deadlock where the minority holds 50% of the voting rights.
• there has been an overall breakdown of trust and confidence between quasi-partners. Note however that if this is down to conduct of the petitioner, then they are unlikely to succeed. Other remedies may be available in order for the shareholder to exit the company in these circumstances.

If a petitioner delays in seeking this remedy, or their conduct is below standard during the course of the proceedings, the court might refuse to grant this relief.

Remedies for breach

The only remedy that the court can give if the petitioner’s case is made out is for the company to be wound up.

If this petition is bought at the same time as an application for unfair prejudice, then it may be that the court will follow that route as an alternative, and therefore will have wider powers to make whatever order they think is fit in the circumstances.

Normal time periods

From start to finish of a winding up petition, that is from the issue of the winding up order to the court making a formal order to wind up the company, it can take approximately 8-10 weeks. This however assumes that all of the steps proceed smoothly and for example, the winding up order is not disputed or adjourned.

Issuing of the winding up petition

To issue a winding up order, the relevant winding up petition document needs to be completed and this needs to be done very carefully in order to avoid dismissal of the petition happening earlier. This is especially true due to the current changes imposed by the Corporate Insolvency & Governance Act.

• it is vital to get the drafting correct;
• defective winding up petitions can lead to early dismissal and wasted costs;
• However, once the winding up petition is properly drafted then it is filed on-line with the appropriate court fee and the court will issue the winding up order.

Service of the winding up petition

The winding up petition then needs to be personally served on the company. At FWJ we can arrange for the winding up order to be served on the company by use of a process server. That usually happens within 24 hours of the issued winding up petition being received back from court.

The return date – when the parties are due back in court

When the issued winding up petition is received back from court, there will be a date on it indicating when the winding up petition hearing is. That hearing is normally 8-10 weeks after the date the winding up petition was issued, but it is now taking longer due to Covid.

What to do before the court hearing in order to wind up a company

In order to wind up the company at that hearing and obtain a winding up order, the petition must be advertised in the London Gazette.

• the winding up advert can only be placed 7 business days after service of the winding up order;
• prior to the winding up hearing, certain documents also need to be filed at court including the documents relating to whether the petition has been supported by other creditors as well as with a document known as a continuing certificate of debt;
• if the winding up procedure has been properly completed, then at the court hearing, the court will make a winding up order and the company will be formally placed into liquidation.

However, there are many things which might slow the process above down. For example if the winding up order is disputed by the debtor or the parties agree for whatever reason for the winding up petition to be adjourned for a further date in the future, then the process can take longer. However on average the winding up petition process takes approximately 8-10 weeks.

Winding up petition hearings normally take place once a week at a court. Many different winding up petitions will be listed for the same half day period – and the court itself is normally fully of barristers representing either the petitioner or the company who is facing a possible winding up. It can be a daunting place to be – but we can help arrange expert help with a good barrister to attend on your behalf if you need it.

What can happen at a winding up petition hearing

At the winding up petition hearing, the court has an number of options available to it:

• make the winding up order. If this happens – the company will officially be wound up and a liquidator appointed over it.
• dismiss the winding up petition. This can happen if the debt has been paid prior to the hearing and both sides are happy for it to be dismissed. Alternatively the Judge can dismiss it if there are procedural irregularities – for example it wasn’t served properly.
• adjourn (delay) the winding up petition until a later date. This is often as a result of an agreement between the petitioner and the company which is facing the petition – normally because they have reached an agreement to repay the debt over an extended period of time.
• make an interim order. This can be where the company alleges the debt is disputed – in which case the judge will give “directions” for the case to be listed for a full hearing and evidence exchanged in advance.
• make any other order as the court sees fit.

If a winding up petition is defended, the court are unlikely to make an order at the first hearing. It is likely that the hearing will be adjourned to a date one time in the future to allow the parties more time to put forward their respective cases.

It should be remembered that in the general winding up petition list, the court simply does not have sufficient time to hear detailed arguments from both the creditor and debtor, The case is likely to be adjourned to another date, where the court can take its time to consider the arguments put forward by both parties and to set a timetable for directions if necessary.