Injunctive Relief and Winding Up Proceedings

Injunctive Relief Winding Up Proceedings

A winding-up petition is a formal court document that can be served on a company that declares the intention of a petitioning creditor to have the debtor company placed into liquidation. If a winding-up petition is not dealt with in the appropriate manner, a company may be forced to fall under the control of a liquidator, who will look to sell the company’s assets and distribute the proceeds to creditors.

Winding-up petitions can also lead to the freezing of company bank accounts, unless a validation order is granted.

Winding-up petitions can be used as a tool by creditors seeking to recover debts owed by a company. Ignoring a winding-up petition can have serious consequences for companies so if your company has been served with a winding up petition, you should take prompt legal advice from a litigation solicitor or insolvency solicitor on your options.

If your company is served with a winding-up petition, it does not mean that your company is insolvent, but it does mean that someone is claiming that your company is insolvent.


What to do when you receive a statutory demand


Generally, a creditor relying upon a statutory demand served on a company must wait 21 days before it can issue a winding up petition. During that time, if the company disputes the debt, it should correspond with the creditor about the alleged debt and the nature of the dispute. Companies should seek a written undertaking from the creditor not to issue or advertise a winding up petition unless a reasonable period of written notice has first been given.

If you cannot resolve the dispute, and the creditor does not want to give an undertaking, it may be necessary to apply to the court for an injunction to restrain the issue of a winding-up petition. The creditor cannot properly issue any winding-up petition off the back of its statutory demand while the injunction is in place.

If a winding-up petition has already been issued and the company wishes to dispute all or part of the debt claimed in the petition, it can request an undertaking from the creditor not to advertise the petition. If that request is declined, a company can seek an urgent injunction to restrain the advertisement of the petition. There are a number of factors that a court will take into account when considering whether to grant an injunction.


Obtaining the injunction


Applications for injunctions to restrain winding-up petitions, or to restrain advertisement of winding-up petitions, are filed in the Companies Court. The Court can grant the injunction for a number of different reasons, such as:


·        If the winding up petition has been issued for collateral purpose, a creditor cannot issue a petition if the intention is not to recover the debt but instead gain an advantage. For example, if the effect of your company being put into compulsory liquidation permits the creditor to implement a significant restructuring plan, then the Court may take the view that the winding-up petition has been issued for an improper use.

·        If there is a genuine dispute about the debt.

·        If the company has a cross-claim (and whether that cross-claim will reduce the debt claimed under the petition to less than £750). To obtain an injunction on this ground, a company must be able to demonstrate that it has its own claim against the creditor equal to or greater than the amount claimed in the statutory demand or winding-petition.

·        If the petition is bound to fail (for example, by making a claim which is statute-barred): this is a relatively straightforward basis for seeking an injunction against the petitioning creditor. If the petition relies on a claim that a court would not hear, such as enforcement of a judgement that is now out of time, it cannot proceed with the petition.


How can I apply for injunctive relief?


Injunctions are not granted lightly by the courts; detailed evidence must be provided in order to obtain an injunction. Those seeking an injunction to restrain presentation of a winding-up petition must provide evidence that the debt is disputed on reasonable grounds.


If a court finds that a winding-up petition was issued in circumstances that it should not have been and dismisses the petition, it will usually order the unsuccessful petitioner pay the legal costs of the company who has successfully resisted the petition.

Injunctive relief solicitors can assist clients by advising them on the evidence required for an injunction and the strength of their potential case.


How can South Bank Legal assist with injunctive relief and winding up petitions?


It is critical points that companies served with statutory demands and winding up petitions/ winding up orders act swiftly. Delay may result in the liquidation of a limited company or compromise a company’s entitlement to recover costs if it successfully obtains an injunction.

Our injunctive relief solicitors handle a wide range of winding-up proceedings, and we can advise you on how to stop a winding-up petition from progressing to avoid the wind up of a company. Our client profile is particularly diverse, and we have a good track record of assisting clients in these types of matters and representing them at a Court hearing, if required.

If you have received a winding-up petition and are looking to seek injunctive relief, you can contact South Bank Legal, a Central London commercial law firm, if you wish to confidentially speak to an appropriately qualified insolvency practitioner or a company statutory demand solicitor. Fill in the form below and someone will be in touch within 2 working days.


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