Introduction
If a winding up petition is genuinely disputed – urgent action is often required. As a debtor you can apply for the petition to be struck out or for an injunction to stop it being advertised in the London Gazette. As a creditor, you need to try to extricate yourself from the situation with as little damage as possible. Our superb team can help.
Whatever side your find yourself on – our team is able to help.
If you are served with a petition
In terms of the debtor company served with a winding up order, if it believes the debt is genuinely disputed, then it can take the appropriate action to have the winding up petition dismissed from court.
A winding up petition should only ever be issued in circumstances where the debt is undisputed (or at least £750 of it is undisputed).
If the debt is genuinely disputed and a winding up petition has been issued, the winding up court will very much frown upon that process and can have it struck out for abuse of process. This is because the courts generally view winding up petitions as something which should only be issued where the company is genuinely insolvent and should be wound up so that there can be a fair distribution of the remaining assets to the creditors of the company.
It is possible to defend a winding up petition on a number of different grounds. For example,
- The winding up petition may be genuinely subject to a dispute.
- If this is the case, the petition should be dismissed from court and the creditor should commence proceedings in the right court namely the county court or the high court
- If the winding up order debt is genuinely disputed, then the winding up procedure is the wrong one for a petitioner to use in order to collect the debt. The right procedure is a CPR Part 7 claim in the traditional court and not the winding up insolvency court. If the debt is subject to a genuine dispute the court will strike out the winding up petition and order costs in your favour. However, legal advice is highly recommended to consider whether you have a genuine dispute or not.
- For example, simple cashflow difficulties and inability to pay now is not a genuine dispute. However, a dispute over whose terms and conditions bind the contract or whether the goods/services supplied are defective could constitute genuine grounds to dispute the debt. So long as you can dispute the debt and show that less than £750 is genuinely due and owing, then the petition can be struck out.
- If you have a counterclaim against the petitioner, this can lead to the petition being struck out. For example, if the debt claimed is £7,000 but you have a separate claim against the petitioner in respect of another matter or for losses arising out of the contract under which the goods or services were supplied, then this can lead to the petition being struck out if your claim overreaches their claim. For example, if your claim is £8,000 then the net effect is that your position is that the petitioner owes you the money and not the other way around. This can lead to a winding up petition being struck out.
- If the winding up petition document is defective or procedurally wrong in any way, this can lead to the winding up order being struck out. If the petitioner has tried to prepare the document without legal advice, it can often have procedural errors in it. Equally, if the winding up petition is not served correctly in accordance with the winding up petition company law rules, then this too can lead to the winding up petition being dismissed. Proper adherence to the winding up procedure is vital. Failure to do so can lead to winding up petition dismissal.
- The winding up petition may be an abuse of process and being used to “bully a debtor” into payment. In those circumstances, the petition can be dismissed by way of an application to the court.
Therefore, if a debt is genuinely disputed
- the court can strike the winding up petition out; and
- order very significant costs against the petitioning creditor.
Whilst the petitioning creditor can then still issue a traditional county court or high court claims, it will find itself having been on the wrong end of a large costs order for abuse of the winding up process.
Winding up petitions are something which should be used with great care and in circumstances where it is unclear if the debt is genuinely undisputed, should not be used.
Applying for an injunction
A respondent to a winding up petition may also make an application for an interim injunction to help it avoid the worst effects of a winding up petition.
An interim injunction is a type of court order which prohibits a creditor from advertising the petition in the London Gazette. It is the process of advertising the winding up petition in the London Gazette which often leads to the failure of the debtor company. This is because
- the company bank account will be frozen by the bank and the debtor company cannot make payments out of the bank account;
- other creditors of the company also become aware of the existence of the winding up petition and can support the winding up petition;
- suppliers will refuse to supply unless it is cash on delivery;
- the sheer weight of numbers can then lead to difficulties by the debtor company which without the necessary validation order from court in order to continue trading will spell the end of the life of the company.
Injunctions can be obtained in the following situations:
- Before a petition is issued at court – if you are aware of the threat and the creditor won’t withdraw the threat. The interim injunction could stop the petition being issued in the first place
- Once the petition has been issued and served – to stop it being then advertised in the London Gazette – and becoming public knowledge.
Five reasons to instruct FWJ for the defence process:
Legal expertise. Our defence team specialise in insolvency and litigation law and possesses a comprehensive understanding of the legal framework and intricacies involved in defending a winding-up petition.
Strategic planning. Our petition defence team can devise a strategic approach to defend the petition, assessing the company’s financial position, identifying potential weaknesses in the creditor’s case, and formulating a strong defence strategy.
Evidence gathering. Out team can work with you to gather and present the key evidence to get the petition removed, including financial records, contracts, and other documentation, to support the company’s defence and challenge the creditor’s claims effectively. We can turn this in to the detailed witness statement evidence you will need to present to court.
Court representation. We can arrange the right barrister to attend court on your behalf if the petition goes to a full hearing. They will add credibility to the defence and ensures that all legal arguments and evidence are presented persuasively to the judge.
Negotiation skills. Our team can often help negotiate the removal of the winding up petition without a full hearing – saving you legal costs and time.
Let the FWJ petition defence team help – call today
Receiving a winding up petition can be a very frightening experience. With our team you will be in safe hands. Since 2002, our team has dealt with well over a thousand petitions over the years and successfully resolved many of them to the benefit of our clients. Let our team help you today.
If you have received a winding up petition and dispute it, then we can help you in the process of fighting a winding up petition. We appreciate that a petition can be a scary document to receive. We can help take the stress out of the situation.
