Defending a Winding Up Petition: Can a Winding Up Petition be withdrawn?

What steps can you take to stop a Winding Up Petition?

If a Winding Up Petition has been issued against your company by a creditor, you’re in a very precarious position. If you bury your head in the sand and hope the petition will go away, there’s a good chance that your business will be wound up by the court and liquidated. Thankfully, there are steps you can take to get a Winding Up Petition withdrawn or dismissed, but you need to act fast.

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What is a Winding Up Petition?

A Winding Up Petition is the most serious action a creditor can take against your business. It will usually come after a creditor, such as a supplier, lender or HMRC, has made multiple attempts to collect the money you owe. A creditor will usually issue you with a Statutory Demand first. If you do not repay the full amount within 21 days, they can then serve a Winding Up Petition against you, which effectively asks the court to liquidate the company as they believe it to be insolvent. 

Due to the costs involved, any creditor that issues a Winding Up Petition is usually very serious in their intent to recover the money they are owed or put you out of business. However, there are also times when creditors use Winding Up Petitions maliciously to try and settle a dispute.

Whatever the creditor’s motivation, it is possible to get a Winding Up Petition withdrawn. We can advise you on how to do this, but please contact us quickly, as the longer the situation goes on, the fewer options you’ll have.

How long do you have to get a Winding Up Petition dismissed?

Once you have been served with a Winding Up Petition, you have just seven days until the petition is advertised in the Gazette. At that point, the petition will become public and the banks will usually freeze the company’s accounts. That can make it very difficult to continue trading or pay the money you owe. 

The Winding Up Petition hearing usually takes place eight to 10 weeks after the petition date. At the hearing, if the court agrees with the creditor’s claims, it can make a Winding Up Order against your business and the options available to get the petition withdrawn will be severely limited. That’s why it’s so important that you act quickly to get a Winding Up Petition stopped. 

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What are the different ways of defending a Winding Up Petition?

There are several different ways you can get a Winding Up Petition dismissed.

Pay the petitioning creditor

If you pay the creditor who issued the Winding Up Petition the full amount you owe (plus the creditor’s costs), you can prevent the petition from being advertised in The Gazette. If the petition has already been advertised and the company accounts have been frozen, you could seek a Validation Order from the court to allow you to make the payment. 

Dispute the amount or the existence of the debt

Another way to have a Winding Up Petition withdrawn is to dispute the size of the debt or the existence of the debt at all. You should only take this approach if you have evidence to support your argument, as making false claims to the court can have serious consequences.

In this case, you will have to inform the courts and your creditor of your intention to dispute the debt. You can then present your evidence to the court to show that there has been a genuine disagreement. Alternatively, the creditor may owe you money that you can set off against the debt, or they may have added unreasonable costs to the Winding Up Petition which you do not accept.  

Negotiate an informal payment plan with the creditor

If you can show that the company is capable of paying its debts if you’re given more time, you may be able to negotiate a payment plan with the creditor. An important step in this process is to persuade the creditor not to advertise the petition in The Gazette. That will allow you to continue trading and give you more time to come up with a realistic payment plan that you can afford. 

Enter into a Company Voluntary Arrangement

If the company is insolvent and cannot afford to pay the money it owes, entering into a formal insolvency process called a Company Voluntary Arrangement (CVA) could stop the winding up petition and give you time to turn the company around. A CVA is only suitable if the company is viable and could be profitable in the future. 

An insolvency practitioner will need to be appointed to create a feasible payment plan for all your creditors, not just those that have issued the petition. If your creditors agree to the proposal, you will be able to continue to trade while repaying your debts over a typical period of three to five years.

Go into administration

Placing the company into administration creates a legal protection around the company, called a moratorium, which ceases all legal action, including the winding up petition, for eight weeks. However, the court will need to consider the needs of the creditors and the petitioner before granting an Administration Order. 

If an Administration Order is granted, an insolvency practitioner, acting as the administrator, will have the breathing space they need to try to rescue and restructure the business. Alternatively, an administrator may seek to maximise the returns for the creditors by selling the company or its assets via a Pre-Pack Administration.

Voluntarily liquidate the company

If the Winding Up Petition is valid and your company is no longer viable, you can take back some control of the process by placing the company into a Creditors’ Voluntary Liquidation (CVL). This is a last resort when all your other options have been explored and exhausted. 

A Creditors’ Voluntary Liquidation will lead to the closure of your business and the sale of its assets for the benefit of your creditors. However, the process is preferable to being forced into Compulsory Liquidation by a Winding Up Petition.  

Do you need help defending a Winding Up Petition?

Seeking professional advice quickly is the key to getting a Winding Up Petition stopped or dismissed before too much damage is done. Contact us for same-day advice online, over the phone or in person at one of our 100+ offices nationwide.