Winding Up Petitions


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What Is A Winding Up Order?

in Winding Up Petitions

A winding up order is an order by the court that a company or partnership should be “wound up” and liquidated.  This is usually known as compulsory liquidation.

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What Is A Winding Up Order?
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Understand How Winding up petition in Scotland Work

in Winding Up Petitions

We are a Scottish registered company and a creditor has threatened a winding up petition. Is the procedure in Scotland different to that in England? Yes, the winding-up petition process in Scotland is significantly different and often more immediate than in England, which can severely limit a company's options. The key difference lies in how and when the petition is made public.The Process in England In England, after a winding-up petition is served, there is a delay of at least seven days before it can be advertised. The petition must be advertised in The Gazette at least seven days before the court hearing. This "grace period" is crucial for a company. Once a bank sees the advertisement, it will almost certainly **freeze the company's bank account**. Banks do this to protect themselves, as a liquidator can later reclaim any payments made after the petition was served. This freezing of the bank account is often a fatal blow, but the seven-day delay provides a window of opportunity for directors to seek advice and prepare a response.The Process in Scotland In Scotland, the process is far more immediate and damaging. The minimum debt for a winding-up petition is £10,000. When the petition is lodged with the court, a "First Order" is immediately given, which authorizes both service and advertisement. Crucially, the petition is also "Walled" so pinned to the court's public notice board. Banks actively monitor these wallings. As soon as a bank spots a walled petition, it will immediately freeze the company's bank account, often before the directors are even aware of the action. This leaves the company with no access to funds to pay staff, suppliers, or legal advisors. This immediate freezing of funds can be a "knock out blow" that prevents the company from lodging a defense or proposing a Company Voluntary Arrangement (CVA), often leading directly to liquidation. There is no grace period for advertising as there is in England.Our Advice To mitigate this risk in Scotland, we strongly advise directors to lodge a "caveat" with both their local Sheriff court and the Court of Session. A caveat requires the court to notify the company if a winding-up petition is being pursued. This notification provides some lead time, allowing directors to prepare answers and a potential CVA proposal while the bank account is still operational. This small window of opportunity is vital for a company to have a fighting chance to continue to trade and seek a solution. A winding-up petition can be the death knell for any company, and in Scotland, the speed of the process makes acting quickly to lodge caveats and prepare a defense all the more critical.So if you feel under threat then DO NOT DELAY and talk to Eirlys Lloyd our expert advisor on these matters on 0131 242 0081 or 08009700539

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Understand How Winding up petition in Scotland Work

What is a Validation Order?

in Winding Up Petitions

A validation order is where a company can apply to 'unfreeze' the company's bank account. This is a court order that essentially "validates" transactions going through the account and prevents a liquidator from holding the bank liable for money being withdrawn, whilst there is a winding up petition.

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What is a Validation Order?

What is the effect of a winding up petition on a football club?

in Winding Up Petitions

Firstly...what does 'being served a winding up petition' mean? If a company or football club has been served a winding up petition then it usually means that all previous attempts at settling the debt have been unsuccessful. As such the creditor uses the "nuclear option" whereby they say that the club has to be wound up as it simply cannot pay its debts. An application, or petition, is made to the High Court (this is the winding up petition) to ask the court to wind the company up.  Southend United were the latest to feel this action. And the process? An application is made to the high court to ask the court to wind the company up.20-75 days after the petition has been sent to the company and a hearing is arranged in the High Court or Court of Session in Scotland, for the Court to consider whether it should put the company into compulsory liquidation or not.Note, the winding up petition has to be advertised more than 7 days before the hearing. This puts the process in the public eye and gives a very public indication that the club has not paid some of its debts. As expected, this makes everyone worry about the future of the club. Will the players be paid? Will the club continue to play? Will it be deducted points?For most businesses once a winding up petition has been advertised the business is in effect paralysed as the bank will freeze the account in order to avoid any "disposition of assets". Football clubs are not run purely for profit but also for pleasure by their (usually) wealthy owners. As such, the freezing of the bank account of the club does not usually mean that the club has to shut immediately. Money is often forthcoming from other sources connected to the owners. Of course, it is also not unusual for the monies outstanding to be paid personally by the owners to avoid administration. The personal circumstances of the owners are often complex and there are other companies that are involved in the actual running of the club. As such the effect of a winding up petition does not necessarily mean the end of the football club.But the petition pressure and director being worried about wrongful trading can lead to a situation whereby insolvency proceedings are taken by the directors. This usually involves placing the company into administration. The company must then enter a CVA to exit administration usually with a new owner or funder so it can regain its licence to play in the Football League, Premier League or the Scottish equivalents. The club will be deducted at least 12 points.If the CVA is rejected, as happened before in the case of Leeds United when the administrator sells to a new buyer, then a further points deduction is made - often 15 points. This led to two relegations for Leeds.Interestingly the CVA must pay the football creditors (players and leagues) 100p in £1 BEFORE any creditors like HMRC! Otherwise the CVA is not valid and further points can be deducted or the licence to play in the relevant league withdrawn the ultimate sanction. Given that HMRC are now preferential there is unlikely to be any payments for other creditors. HMRCs Involvement In the football world it is usually HMRC who serve the petitions as it is the main creditorWhat is more, with the level of players wages, the total PAYE liability of the club is usually very high. Any delay in the payments of these amounts over the HMRC does give the club a cashflow boost. Updates At the most recent Owners’ and Executives’ Conference and AGM, a number of new rules were decided regarding the insolvency process and football clubs. The League’s Insolvency Policy has been changed to include the following:Football clubs are no longer required to enter a company voluntary arrangement (CVA) 12 points deduction for a club going into administration (up from 10 points) Continuing to support the Football Creditors Rule whereby football debt is paid before any other creditor (like HMRC). Administrators must have 21 days at least to market a football club that’s in administration, and meet the club’s supporters’ trust to allow them to put forward a bid. Buyers of football clubs (in administration) must pay back creditors a minimum of 35p in the pound over three years (or 25p if transferred by shares). If this isn’t followed, there will be a 15 point deduction the next season. If an individual buys a club with 10% shareholding or more, he/she must inform the Football League.The League wants to focus on strengthening their insolvency policy to make it fair to employees, supporters and creditors.A possible downside to the 21 days rule could be the club is on the market for a considerable amount of time. This could cause the business to lose value over time if suppliers and customers lose faith.

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What is the effect of a winding up petition on a football club?

Can A Winding Up Petition Be Withdrawn?

in Creditor Actions Winding Up Petitions

A winding-up petition is a serious legal notice. If your company receives one, your first priority is to get it withdrawn to avoid compulsory liquidation. Here is a guide to the process.What is a Winding Up Petition? A winding-up petition is a legal notice filed with the court by a creditor who is owed more than £10,000 and has not been paid for over 21 days. In essence, the creditor is asking the court to put the company into compulsory liquidation.The Steps to Get a Petition Withdrawn If the debt can be paid, the winding-up petition can be withdrawn, removing any further threat of liquidation. Here is a step-by-step process for getting a petition withdrawn before it’s too late.Obtain Written Permission: The creditor must get written permission from an officer of your company to settle the debt out of court. This letter should state the creditor's intention to withdraw the petition once the debt is paid. Agree on a Settlement: A settlement should be agreed upon and executed between your company and the creditor. Get Written Confirmation: Once payment is received, the creditor should notify your company in writing that the debt has been settled and they intend to withdraw the petition. Apply to the Court: Your company must apply to the court for permission to withdraw the winding-up petition. Note: This must be done at least five days in advance of the petition hearing and the petition must not have been advertised yet. You will need to provide proof of the settlement and the creditor’s intent to withdraw. Send Written Notice: Once the court has granted permission, a letter should be sent to the court and copied to all involved parties as proof that the petition has been withdrawn.Other Outcomes if a Petition Isn’t Withdrawn If the petition is not withdrawn, the following can happen:It Can Be Adjourned: The court can grant a postponement if your company can convince the court that it can pay the debt and continue to trade. Adjournment gives your company the breathing room it needs to collect money owed and prepare for an insolvency procedure. It Can Be Disputed: The petition can be dismissed by the court if you can provide proof that it is invalid or inaccurate. When this occurs, the court can order the petitioning creditor to pay hefty costs. It Can Be Dismissed via a CVA: The court can dismiss the petition if it determines your company can repay all or some of the debt through a Company Voluntary Arrangement (CVA). A CVA creates a payment plan to pay back debt over a period of 3-5 years.Final Advice If a winding-up petition is not withdrawn or dismissed, the court will eventually grant a winding-up order, and your company will be placed into compulsory liquidation. The key is to act quickly and understand all your options.For further guidance and expert advice, contact us today on 0800 970 0539. 

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Can A Winding Up Petition Be Withdrawn?

My Company’s Bank Account Has Been Frozen What Can We Do?

in Directors Duties in Insolvency and their Implications Winding Up Petitions

If your company’s bank account has been frozen, it’s likely the bank has seen a winding up petition advertised in the London Gazette or has found out the company is going into an insolvency procedure like a company voluntary arrangement (CVA) or administration.  It is rare however for the bank to freeze the account if it is in CVA.Banks have to take necessary steps to prevent what is called the "disposition of assets"  i.e. the bank doesn't want to see large sums of money being withdrawn as they are liable for any money taken out if the company is insolvent. Once the account is frozen, there are very limited options for company directors. You can prevent this from happening by seeking insolvency or restructuring advice as soon as financial issues arise. Get help with debt before a creditor can issue a winding up petition. Apply for a Validation Order A validation order can be used to gain access to the bank account.  A validation order is an expensive process but it should not be necessary if the account has been frozen due to misunderstanding etc.  It is really where a judge has to be persuaded that the company will not withdraw all the money as they fear insolvency. In the instance where a winding up petition has been served, they need to be persuaded that the company will be able to pay its debts or that an deal with its creditors can be done.  This will mean that a draft CVA is most likely needed.Seek guidance from an insolvency practitioner or turnaround advisor. If the company is viable, it may be eligible to enter a company voluntary arrangement. If the company is no longer viable and you want to close it down, consider the creditors voluntary liquidation option.My company has gone into a CVA and now the bank has frozen the account.  Why? This is actually very rare.  The bank may have received wrong or misguided information about the company and, if this is the case, you must act quickly to rectify the problem by telling the bank to contact us or your chosen advisor. The supervisor dealing with the CVA will need to explain the situation and stress the company is still trading and needs access to funding to survive the CVA. A CVA can only go ahead if 75% of creditors (by value) have approved the proposals. Regardless of whether they approved the CVA or not, if there was a majority vote to proceed, the bank should not freeze the account.If your company’s bank account has been frozen or you need some advice about your company, call us now on 0800 9700 539. One of our advisors can talk you through all the options available to your specific situation.

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My Company’s Bank Account Has Been Frozen What Can We Do?

Who is the Official Receiver?

in Winding Up Petitions

The Official Receiver is a civil servant in The Insolvency Service and an officer of the court. They will be notified by the court of the bankruptcy or winding-up order of a company.

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Who is the Official Receiver?