How do you get a winding up petition dismissed or adjourned?

10 August 2017

dismissing a winding up petition in court

A winding up petition is a serious problem for the company especially if it has been advertised. Once advertised the bank will freeze the account and this can be the end of the company as suppliers, employees and other creditors will not be paid. Thus any goodwill left in the company will be hanging by a thread. In the case of Lotus, the petition was not advertised in the London Gazette but a beady eyed reporter spotted it on the court list for that day and published the fact. Lotus had obviously got an agreement with the petitioner not to advertise and as it turned out the matter was settled and the winding up petition was dismissed. However the petition still had to be heard. So what happens in the event of the petition being heard by the court?

The court simply has to decide whether a winding up order is to be made and that the company is to be compulsorily wound up. The judge can decide to dismiss the petition if they think that the company is able to pay back a reasonable proportion of the debt i.e. in a CVA or an agreement to pay back over an extended time period.  Although this is becoming increasingly difficult these days.

Other grounds might include: Abuse of process by the petitioner In this case the judge has to be satisfied that the petitioner is using the court to settle a score/dispute or have a commercial advantage ie a competitor.

It can also have regard to the position of the other creditors. Re Dollar Land (Feltham) & Ors [1995] BCC 740 reported that the court decided that a winding-up order should be rescinded if there was a real prospect that CVA proposals would be approved by the company's creditors.

In other words let the CVA majority decide. The amount of the debt is not proven It would be a foolish petitioner and indeed a foolish recipient to let it get to this stage without the facts being established. The judge can award costs to either party in this case. Normally if the debt is not proven an adjournment can be sought. An agreement has been reached and/or the amount has been paid.

The case is simply here that the parties have agreed that the debt is paid or the dispute settled. This is what happened in the Lotus case it seems but as the petition was not actually withdrawn in time so the case had to be heard by the judge. One important thing to remember is when asking a judge to make such a ruling there will be the need for lots of evidence to prove your case. Verbal agreements cannot be enforced here.

Make sure you have instructed a reputable solicitor or turnaround practitioner to help make your case. For advice on how to deal with winding up petitions, including how to dismiss a winding up petition, visit our winding up petition page on company rescue. 

Categories: Winding Up Petition, Winding up petition

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