Defending a Winding Up Petition: Can a Winding Up Petition be withdrawn?

What steps can you take to stop a Winding Up Petition?

If a Winding Up Petition has been issued against your company by a creditor, you’re in a risky position. Ignoring the petition and hoping it disappears greatly increases the chance of your business being wound up by the court and liquidated.

Fortunately, there are measures you can take to have a Winding Up Petition withdrawn or dismissed, but prompt action is necessary.

 

What is a Winding Up Petition?

A Winding Up Petition is the most crucial step a creditor can take against your business. Typically, it follows multiple attempts by a creditor, such as a supplier, lender, or HMRC, to recover the money you owe.

Normally, a creditor will start by sending you a Statutory Demand. If you fail to repay the full amount within 21 days, they can proceed to serve a Winding Up Petition against you. 

This petition effectively requests the court to liquidate the company under the belief that it is insolvent.

Because of the expenses involved, creditors who issue Winding Up Petitions are typically highly committed to recovering the money owed or closing down your business. However, there are instances when creditors maliciously use winding-up petitions to attempt to resolve a dispute.

Regardless of the creditor’s intentions, it is possible to have a Winding Up Petition withdrawn. We can guide you on the steps to take, but please reach out to us promptly. The longer the situation persists, the fewer options you’ll have available.

 

How long does it take to dismiss a winding-up petition dismissed?

Once you’ve received a Winding Up Petition, you have only seven days before the petition is advertised in the Gazette. 

At this stage, the petition becomes public, and banks typically freeze the company’s accounts. This can severely impede your ability to trade or settle outstanding debts.

The Winding Up Petition hearing typically occurs eight to 10 weeks after the petition date. During the hearing, if the court sides with the creditor’s claims, it can issue a Winding Up Order against your business. 

At that point, the options to withdraw the petition become significantly restricted. This underscores the importance of taking swift action to halt a Winding Up Petition.

 

How to defend a Winding Up Petition? [Explore The Effective Ways!]

You can dismiss a Winding Up Petition through various methods:

1: Pay the petitioning creditor

If you settle the full amount you owe (including the creditor’s costs) to the creditor who issued the Winding Up Petition, you can prevent the petition from being advertised in The Gazette. 

If the petition has already been advertised and your company accounts are frozen, you may request a Validation Order from the court to facilitate the payment.

2: By disputing the remaining debt

You can also have a Winding Up Petition withdrawn by disputing the amount or the existence of the debt. Only pursue this option if you have evidence to support your argument, as making false claims to the court can lead to serious consequences.

In such instances, you must inform the courts and your creditor of your intention to dispute the debt. 

You can then present your evidence to the court to demonstrate a genuine disagreement. Alternatively, the creditor might owe you money that you can set off against the debt, or they may have included unreasonable costs in the Winding Up Petition, which you dispute.

3: Discuss an informal payment plan with the creditor

If you can prove the company can settle its debts given more time, you might negotiate a payment plan with the creditor. Convincing the creditor not to publish the petition in The Gazette is crucial. This lets you keep trading and provides time to create a workable payment plan within your means.

4: Get a Company Voluntary Arrangement (CVA)

Consider entering a Company Voluntary Arrangement (CVA) if the company is insolvent and unable to pay its debts. This formal insolvency process could halt the winding-up petition, offering a chance to revive the company. A CVA is appropriate only if the company is viable and has potential for future profitability.

You’ll need to appoint an insolvency practitioner to develop a viable payment plan for all your creditors, not just those who issued the petition. If your creditors accept the proposal, you can keep trading while repaying debts over three to five years.

5: Administration process 

Allowing the company into administration triggers a legal safeguard, known as a moratorium, which halts all legal proceedings, including the winding-up petition, for eight weeks. However, the court must weigh the creditors’ and petitioner’s needs before approving an Administration Order.

If granted, an Administration Order allows an insolvency practitioner, serving as the administrator, the opportunity to attempt to salvage and reorganise the business. 

Alternatively, the administrator might aim to optimise returns for creditors by selling the company or its assets through a Pre-Pack Administration.

6: Place a Creditors’ Voluntary Liquidation (CVL)

If the Winding Up Petition is valid and your company is no longer sustainable, you can regain some control by initiating a Creditors’ Voluntary Liquidation (CVL). This step is the final option after exploring and exhausting all other alternatives.

Opting for a Creditors’ Voluntary Liquidation means your business will close, and its assets will be sold to benefit your creditors. However, it’s a better choice than being compelled into Compulsory Liquidation by a Winding Up Petition.

 

Read More: 

• Defending a Winding Up Petition
• Can I wind up my own company
• What happens when a Winding Up Order is made
• How can a Winding Up Petition be set aside
• My business bank account has been frozen – what can I do

 

Need professional assistance in defending a Winding Up Petition?

Quickly seeking professional advice is crucial to prevent or dismiss a Winding Up Petition before significant harm occurs. 

Get in touch with us for immediate advice online, over the phone, or in person at any of our 100+ offices across the nation.