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Beware - moratorium on issuing winding up petitions has been lifted!

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Up until 31 March 2022 there was a moratorium on presenting Winding Up Petitions against companies who had been effected by coronavirus. 

Since 31 March 2022 we have had numerous enquiries from both creditor clients who are owed money by companies and by companies themselves who are being threatened with the presentation of a winding up petition.

There are a number of practical steps to consider before issuing a winding up petition:

The purpose of issuing a winding up petition is to have the company wound up by the court and this signals the end of the company. The threat should not be made lightly.

A company can be wound up if they are unable to pay their debts as they fall due.  A creditor should first issue a statutory demand if they are owed more than £750.00, if a company fails to pay a statutory demand exceeding £750.00 it is deemed unable to pay its debts.  A creditor can demand payment by issuing a demand letter but in our experience this is more likely to be challenged by the company.

A winding up petition must not be presented if the debt is genuinely disputed on substantial grounds or if the company has a cross claim that exceeds the debt demanded by the creditor.

Threatening the presentation of a winding up petition can be risky if the debt is likely to be disputed.

A winding up order will result in the company going into liquidation which signals the end of the company.  Presentation and advertisement of a winding up petition can have disastrous effects on a company, this includes company bank accounts being frozen and suppliers ceasing to trade with a company.

If a company is served with a statutory demand or threatened with the presentation of a winding up petition, they should urgently take legal advice to ensure that they are able to comply with the demand or respond before a winding up petition is presented. If you have been threatened with winding up, please contact us immediately.

If the debt demanded is disputed or the company has a cross claim exceeding the debt demanded, the company should set out its dispute and ask the creditor to provide an undertaking not to present a winding up petition.

In the absence of the creditor providing an undertaking, the company should immediately apply for an injunction restraining the presentation or advertisement of the winding up petition (as the case may be). 

An application for an injunction can be made at short notice, without giving proper notice to the creditor, once an interim injunction is granted by the court, the court will then set a return date to allow the creditor to respond. The court will decide at the return date whether to make a final injunction order restraining the creditor from presenting or advertising a winding up petition.

For further information about the implications and consequences of winding up proceedings, please contact Jagdip Bains.