A winding up petition being served 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. However, even if the petition is dismissed the petition still has to be heard. This can pose a problem to a high profile company as it is published on the court’s list of cases of the day. So what happens in the event of the petition being heard by the court?
Will My Petition Be Dismissed?
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 the debt or a reasonable proportion of the debt i.e. in a CVA or an agreement to pay back over an extended time period.
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 i.e. 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 Re Dollar Land (Feltham) & Ors [1995] BCC 740 reported that the court decided that a winding-up order should be rescinded if there was a real prospect that CVA proposals would be approved by the company’s creditors.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. If 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. 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.
What about an Adjournment?
Adjournments can be argued by a Barrister in the court to just ask for extra time to sort out their affairs. Once a petition has been issued this is usually a serious wake up call for the company and they really have to face up to their problems. Grounds for an adjournment are generally the following
- The company is due to receive extra finance shortly and just needs more time
- A big debtor is due to pay shortly. This is common if the main debtor is a large company that is slow to make payments
- The company has just appointed advisors to prepare a proposal to work with creditors. This could be a CVA or a time to pay scheme
Costs of an Adjournment
This varies a considerable amount. It can be anything from £600 to £2000. It really depends on how busy the Barrister is and whether there is a reasonable prospect of getting any adjournment granted. Getting all the requisite information together quickly helps in this regard. Ask us about this.
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
