In essence, the creditor would need to be owed in excess of £10,000 for them to be able to validly serve a winding up petition following a statutory demand.

This is different to the rules pre-covid that allowed such a step to be taken if the debt was £750 + (if a company) or £5000 + (if a individual). The temporary measures for the coronavirus pandemic were not renewed on 31^st March 2022 and the threshold returned to pre covid levels on 1^st April 2022.

However, the Government did make the decision to keep some restrictions on the commercial rent arrear process.  

If you require any further information regarding Statutory demands and Winding up petitions or any aspect of Debt Recovery, Insolvency, Dispute or any other Corporate / Commercial advice please contact us to speak to our experts

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A winding up petition can be brought by a creditor on the grounds that the company has become unable to pay its debts.

It is also possible for the company’s own directors and shareholders to issue a winding up petition and for other people such as the Secretary of State to present a petition. This article focuses on petitions brought by creditors.

Consequences of a Petition Being Presented

Procedure for Presenting a Winding Up Petition

• A winding up petition must be presented to the Court and the petitioner must pay the court fee;
• The petition is then served on the debtor company;
• The petition can be advertised in the London Gazette after 7 business days of service of the petition;
• The petition will record the date for a hearing;
• The hearing will usually take place around 4 – 6 weeks after the petition has been issued;
• At the hearing the Court will hear representations made by the petitioning creditor and any representations made by the debtor company.

Opposing a Winding Up Petition

The company may apply for an injunction restraining the advertisement of the petition. An injunction is likely to be granted before the hearing and the petition itself may be opposed at the formal petition hearing where:

• the debt is disputed on substantial grounds; or
• where the proceedings may be regarded as an abuse of process; or
• where the company has a genuine and serious cross claim or right of set-off for an amount equal to or exceeding the petition debt.

If the debt is not disputed then the company may reach an agreement with the creditor to pay the debt as soon as possible and for the creditor to agree not to pursue the petition any further. The petition can only be withdrawn before the formal hearing of the petition in court in exceptional circumstances.

The petition may also be challenged on the grounds that the petitioning creditor has failed to follow correct procedure or on the grounds that the English courts do not have jurisdiction.

The company should file and serve a witness statement not less than five business days before the hearing date setting out the grounds for opposing the petition.

What Happens if the Petition is Successful?

The Court will make a winding up order which places the company in to compulsory liquidation. The official receiver will become the liquidator of the company and will take control of the company’s assets. The powers of the directors will cease. The company’s employment contracts will be terminated which means that the employees will be automatically dismissed.

The liquidator’s role is to wind up the company’s affairs and distribute assets to creditors and members. The company will then be dissolved.

In certain circumstances it may be possible for the company to apply to the court to:

• Rescind the winding up order;
• Stay the winding up order;
• Appeal the order

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