How to stop or challenge a Winding Up Petition

How can you stop a Winding Up Petition and save your company from compulsory liquidation?

A winding up petition against your company can quickly result in it being forced into compulsory liquidation, so it’s important to know your rights when you have been served a petition, and whether you could have the it ‘set aside’ by the court or otherwise challenge it. 

By successfully challenging the petition, you can ensure your company is saved from liquidation and therefore able to continue trading. 

As you only have seven days to put together a case in your defence, you’ll need to act quickly when served with a winding up petition. So under what grounds could you request a winding up petition is either set aside by the court or withdrawn by the petitioning creditor?

How can I stop a compulsory liquidation?

You can stop the compulsory liquidation of your company following the issuing of a winding up petition if you act quickly. If you ignore the winding up petition, the courts will serve a winding up order on you company which will start the compulsory liquidation process. 

What are the possible grounds for stopping a winding up petition?

If you want to have the courts set aside - or throw out - the winding up petition against your company, you need to be sure of your grounds for requesting this, that they are genuine, and you present them in detail with plenty of supporting documentary evidence. You should only go down the route if you are certain that you have a legitimate reason for doing so.

There are four grounds on which you can challenge or oppose a winding up petition and have the courts set it aside:

1. You disagree that you owe the creditor money;
2. You dispute the debt amount;
3. The creditor also owes you money, which cancels the debt or reduces it to less than £750;
4. There’s a procedural error or delay, such as the details on the WUP are inaccurate, or the petition was not issued correctly.

If you intend to challenge the petition, you must file a witness statement with the court at least five business days before it’s due to be heard. You should also provide evidence of your reasons. This is a serious step and one you should only take if you have substantial evidence to support your reasons for disputing the WUP.

“Spoke with Chris who put me at ease straight away. He was very knowledgeable and listened intently to all my worries and concerns. Will definitely be using Real Business Rescue and advise anyone with business issues to give them a call.”

Diana

 

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Chris Bristow
Business Debt Expert

How can I have a winding up petition cancelled?

If you do not have sufficient grounds for having the winding up petition set aside by the courts, all is not lost. There are alternative ways of dealing with a winding up petition and having it dismissed that can help save your company from liquidation.

• Pay the debt in full

Paying the amount you owe in full, plus the creditor’s costs for serving the petition, will prevent the creditor from advertising the winding up petition in the Gazette. If you pay the debt and no other creditors wish to pursue the debt, the court will dismiss the petition. 

• Negotiate an informal repayment arrangement

If you cannot afford to pay the debt in full and need more time to repay what you owe, it’s worth trying to negotiate an informal repayment arrangement with the petitioning creditor. That may be enough to persuade them not to advertise the petition in The Gazette. However, as they’ve already made multiple attempts to recover the debt, the creditor may doubt your ability to stick to the agreement.

• Request an adjournment of the hearing

Another option may be to seek an adjournment to allow you more time to consider your options as to a possible way out of the situation your company has found itself in. You will need to prove that you are engaged with an insolvency practitioner and are evaluating all possible options.

• Enter into formal insolvency proceedings

If you accept your company is insolvent, but you want to avoid having it placed into compulsory liquidation, you can choose to voluntarily enter into formal insolvency proceedings on your own accord. This could involve a number of possible options from administration which could allow you to restructure and reorganise the financial and operational structure of your business, a Company Voluntary Arrangement (CVA) which functions as a legally-binding repayment plan encompassing all your creditors, or Creditors' Voluntary Liquidation (CVL) if you know the company's problems have taken it beyond the point of rescue.

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As a company director you can argue your own case at the petition hearing, but it’s advisable to obtain professional representation. Real Business Rescue has extensive experience in dealing with winding up petitions, and can provide the expert help and advice you need during this time.

If your business has received a winding up petition, you need to act quickly – please contact one of the team to arrange a free same-day consultation with a licensed insolvency practitioner.