“Help! I’ve received a Winding-up Petition.”

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“Help! I’ve received a Winding-up Petition.”

Winding up Petition

If your company owes money to a creditor, and you haven’t responded to their requests for payment, they might send you a Statutory Demand.

This is not a formal court document, but if you ignore it the next step could be a Winding-up Petition.

Why would they send a Winding-up Petition?

A creditor might choose to send a Winding-up Petition because it’s heard in the Companies Court. This is said to be faster than going through normal County Court or High Court proceedings.

It’s also more draconian, because of the effect it has on the debtor’s business.

The risk is that, when a Winding-up Petition is presented to the court, they might make a Winding-up Order.

And then, seven days after service of the petition on the registered office address, an advert can be posted in the London Gazette. Banks monitor these adverts and freeze the bank accounts of any customer companies mentioned.

Any transfers of company property made after presentation immediately become null and void, including delivery of goods to a third party and the payment of staff wages.

In effect, your company is wound up / shut down.

What’s a Statutory Demand?

Let’s go back a step.

The Statutory Demand will usually state that you have 21 days to either pay the debt or apply for injunctive relief – that is, a court order to stop the creditor pursuing an injunction.

It’s important to be aware that the creditor does not have to wait 21 days. It is quite common for their solicitor to write a letter demanding payment within 48 hours or less. If you don’t pay within the deadline, you might be served with a Winding-up Petition.

Case study

We had a client who received a Statutory Demand for payment. On investigation, we discovered that the supplier was contracted to deliver some coding within 30 days, and had failed to do so. We were able to dispute the Statutory Demand, and bring a counterclaim on our client’s behalf. We also obtained a hefty costs order on our client’s behalf against the creditor.

What to do about the Winding-up Petition you’ve received

The last thing you need is to have your company’s bank account frozen with the threat that you can’t pay your staff or landlord.

It’s therefore imperative that you consult a specialist solicitor as a matter of urgency. Don’t delay – get on the phone and get representation! (If you’d like our help, the best number to call is 020 7467 3980.)

Most probably, the Winding-up Petition will be sent to your company’s registered address.

If that’s your accountant’s address, it’s of paramount importance that your accountant knows what to do – that is, to inform you immediately so you can take action.

Note that the creditor’s agent will hand over the document in person, saying something like: “I’m serving you with this Winding-up Petition” – so you can’t pretend you haven’t received it.

What happens next?

The Winding-up Petition will comprise three or four pages of A4, including the date the petition will be heard.

If you dispute the amount owed, you’ll need to explain why and provide evidence. For example, maybe the contract says 90 days and they are chasing you after only 30 days, or the goods were defective, or the services were inadequate.

It must be a bona fide dispute. Whatever your argument, you’ll have to prove it.

Collate all the relevant paperwork and give it to your solicitor. We’ll need chapter and verse, including witness statements and written evidence.

Ideally, sort it into date order and number the paragraphs (this will save us time and so save you money).

What we’ll do

If you have a case, we will write to the creditor’s solicitor explaining why it’s inappropriate to pursue the Winding-up Petition.

If they don’t withdraw it, we will apply for injunctive relief to prevent them from advertising in the London Gazette (remember, that’s where your bank will see the notice and freeze your account).

If you don’t have a case, the danger is that the Companies Court will make a Winding-up Order, and then it’s “Bye bye, business”. You can apply to ‘rescind’ or cancel the Winding-up Order, but it’s more expensive and you have to make the application within a certain deadline.

P.S. This advice applies to companies that have received a Winding-up Petition. We can also help if a company owes you money and you want to issue a Winding-up Petition. We’ll write more on that subject next month.

If you’d like more information about winding-up petitions, call us on 020 7467 3980. We’ll be happy to help.

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