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Winding up petition case study in renewal energy sector

KSA Group Defeats Winding Up Petition and Company Enters a CVA

A business approached us that was involved in the renewable energy sector having seen our website The company was encountering financial difficulties due to heavy investment in intellectual property but sales were below expected levels. However, the investment was beginning to reap dividends and sales were expected to rise rapidly in the future.

In the meantime a number of legal actions were being pursued including a statutory demand but most importantly one creditor, who was owed £70k, was threatening a winding up petition. Our client had offered to pay 5k over 6 months but the creditor was asking for a personal guarantee on the rest to which our client was not prepared to give. Debts to HMRC amounted to 36k, the bank OD was £100k and trade creditors in total were £195k. The company failed all three tests of insolvency.

Our advice was clear that if the company had a good future then a CVA should be considered. However, the matter of the winding up petition had to be dealt with. It so happened that the son of a former director of our client was a director of the creditor company so our corporate advisor Eiryls Lloyd wrote to the solicitors of the creditor and said that our client disputed the debt and it was an abuse of process. This letter of response and its correct wording is an essential element in successfully disputing a debt where a WUP is raised.

Despite this letter the solicitors pursued the winding up process and took it upon themselves to inform the bank of the petition before it was advertised. This meant that we needed to apply for a validation order to unfreeze the accounts. This was duly granted by the court and the judge was scathing of the creditors solicitor for doing this when the debt was clearly in dispute.

In the end the petition was formally withdrawn and the company was able to enter into a company voluntary arrangement with a hive down to create a new subsidiary. The business continues to trade well.
The lesson is that a winding up petition can be challenged if the debt is in dispute if action is taken quick enough and the debts can be compromised by the CVA process.

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