Can You Adjourn a Winding Up Petition?
In order to stop a winding up petition taking effect once it has been issued, you need to instruct a solicitor to seek an adjournment. The court, which has the power to grant the winding up order, also has the power to grant an adjournment of the hearing at which the petition is presented. An adjournment may be granted if the court can be persuaded that the company needs more time to raise the funds or that the amount of the debt is genuinely disputed.
It may be that the company can pay all the money owed at a later date—for example, through the pending sale of a valuable asset currently on the market. However, if the debt is in dispute and this can be legally proven, the court has the power to dismiss the application entirely.
Disputing the Debt: Injunctions to Restrain Advertisement
If you genuinely dispute the debt, you should not wait until the court hearing to argue your case. A creditor is legally forbidden from using a winding up petition as a rogue debt-collection tool for unproven or unliquidated liabilities. If a petition is threatened or served on a disputed debt, your solicitors can apply for an Injunction to Restrain Advertisement. This legally stops the petition from being published in the Gazette, successfully protecting your company’s credit rating and preventing your bank accounts from being frozen in the first place.
Warning: Case law has indicated that the service of a winding up petition makes it incredibly difficult to trade. All transactions will be voided under Section 127 of the Insolvency Act if the company subsequently goes into liquidation. This means suppliers and advisors will rarely continue to support the company, as a liquidator may demand those monies back. See this page for more details which will be updated as the situation changes. In essence, seek advice the moment your company receives threats of a winding up petition.
The Danger of Frozen Bank Accounts & Validation Orders
The moment a winding up petition is advertised in the London Gazette, your bank will automatically freeze your company accounts to prevent what the law calls a “disposition of assets.” This means that while your legal team works to adjourn the petition, you will be completely unable to pay staff, rent, or critical suppliers.
To survive during an adjournment, your solicitor will need to apply for a Validation Order. This is a specific court order that permits the bank to unfreeze your accounts for essential trading expenses, allowing the business to stay operational while the legal timeline plays out.
The Danger of “Carriage” (Why Paying at the Last Minute Can Fail)
A common trap for company directors is assuming that paying off the petitioning creditor right before the hearing will solve the problem. If you settle the debt and associated legal costs in full more than 5 business days before the hearing and before the petition is advertised, it can be safely withdrawn.
However, if the petition has already been advertised in the London Gazette, other creditors will see it. Even if you pay the original petitioner in full, those other creditors can attend the court hearing and claim “carriage of the petition.” The court will simply substitute them as the lead petitioner, and your company can still be forced into compulsory liquidation. This is why a formal legal strategy, rather than a frantic late cash settlement, is critical.
Reasons for Adjournment
It should be borne in mind that if the court is to adjourn the hearing, they will need a substantial and credible reason. As such, you will need a barrister to argue the case, backed up with documentary evidence. We have a number of trusted specialists we can recommend to help you, so please ask for details. A first adjournment can cost just c.£600 if your evidence is produced quickly and clearly.
Promise of Funding
The court may adjourn the hearing if funds to repay the creditor are likely to be forthcoming soon—i.e., an asset has been sold and the defender of the petition is simply awaiting the transfer of funds. Merely having assets up for sale without a finalized buyer is unlikely to force an adjournment, as an appointed liquidator would simply wait to sell those assets themselves after the order is made.
Company Voluntary Arrangement (CVA)
If the company is unlikely to be able to pay off the whole debt immediately, you may get the petition adjourned and ultimately withdrawn by proposing a Company Voluntary Arrangement (CVA). We have on numerous occasions had winding up petitions withdrawn after presenting a draft CVA to the court. However, in order for this to be successful, we need adequate time to prepare the draft, so it always pays to act early. Please read our case studies on how we have defeated winding up petitions by proposing CVAs.
Notice of Intention to Appoint Administrators
Another powerful way to stop a winding up petition (WUP) from taking effect is to serve a notice of intention to appoint an administrator. Once this notice has been filed with the court, an automatic legal moratorium is created over the company. This prevents any creditor from starting new legal action or continuing any existing legal action, including a WUP, without express permission from the court.
The directors can file such a notice, as can a qualifying floating charge holder. This can be executed very quickly once the insolvency practitioners have agreed to act and a lawyer has been instructed. While the process is more expensive and usually utilized as a last resort, it provides essential breathing room for the insolvency practitioners and directors to seek a sale of the business or a further injection of capital.
Do not delay. Call us on 0800 970 0539, or for out-of-hours emergencies, contact us on 07974 086779.
