Opposing Winding Up Petitions

23rd May 2019

The Litigation team has recently been successful in supporting a client in the prevention of a winding up petition following service of a Statutory Demand. The debt was disputed.

Within 24 hours of instructions, we received an undertaking that a petition would not be presented. We made it clear that we would seek an injunction restraining the presentation of a winding up petition, as there was a bona fide dispute over the relevant debt.

The High Court set out in ReCompany (No.006685 of 1996)[1997] BCC 830 (§832F) that:

“The true rule, which has existed for many years, is the rule of practice that this court will not allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds. It will not do so, as a matter of practice, because the effect of presenting a winding-up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary writ action.

The pressure arises from the fact that once the existence of the petition is known amongst those having dealings with the company, they are likely to withdraw credit or refuse to continue to trade with the company on the ground that, if the company is wound up on the petition, their dealings with it will be subject to the provisions in s. 127 of the Insolvency Act 1986. In those circumstances it may well be commercially necessary for the company to pay a debt which is disputed on substantial grounds rather than to run the risk that the whole of the company’s business will be destroyed.”

Our client was delighted with this outcome and the speed of our actions and quality of advice and knowledge.

We can also deal with urgent injunctions in connection with insolvency matters

If you have concerns or issues you can contact our litigation team ph@rogers-norton.co.uk or on 01603 675639.