What happens at a winding up petition hearing?

Published: 22nd February 2020

When a creditor petitions to wind up your company, a hearing is arranged to allow the court to assess the situation and decide on what happens next. It’s an extremely serious matter, but doesn’t necessarily mean that a winding up order will be granted.

Petitions can be set aside by the court if there’s sufficient evidence to show that the debt doesn’t exist, for example, or that your creditor has acted wrongly in trying to wind the company up.

Why hold a winding up petition hearing?

The court needs to understand the circumstances of each case when a winding up petition is presented. They’ll look for the unquestionable existence of the debt, and expect your creditor to have made several attempts to recover their money.

This is a serious action by the petitioning party, and the formalities/legal procedure must be carried out precisely for the petition to be considered. A hearing allows both parties to put their case to the court, present evidence, and enable an informed judgment to be made on whether to grant a winding up order.

So what happens at the winding up hearing?

The hearing can be attended by yourself as a director, and it’s highly advisable to seek professional representation in court. You have limited time in which to act in this situation, but it is still possible to have the petition set aside if you have a compelling case and act quickly.

The petitioner will also attend with his or her representation, and if there is more than one petitioning creditor, each one is likely to have their own legal party to represent them. The judge will want to establish that the creditor’s motives are genuine in petitioning for the company to be wound up – in other words, that they’re sincerely attempting to recover their debt and don’t have any other motives.

Checks will be made on whether the creditor has followed statutory process during the course of petitioning – that the winding up petition has been properly served, for example, and an advert placed in the Gazette.

Potential outcomes of the winding up hearing

  • The court may grant the winding up order, in which case the liquidation of your business will commence.
  • In some cases a petitioning creditor may seek to adjourn their petition – if you’re in negotiations with them for repayment, for instance.
  • If the debt is paid, your creditor may request that the petition is dismissed at the winding up hearing. 
  • The judge may make an interim order.

If one creditor is seeking to wind up your company but several others aren’t in favour of the company’s liquidation, the court may decide to dismiss the petition. A broad view of all the circumstances is taken at a winding up petition hearing, so if you believe you have a powerful case you may be able to have the petition set aside.

Seeking professional assistance

Obtaining professional support as quickly as possible is vital to successfully challenging a winding up petition, and administrators are allowed to attend the court in these circumstances to make representations in your favour.

They may be able to persuade the court that you can repay the debt given a little more time, in which case the judge may adjourn for a given period of time. Begbies Traynor can provide valuable professional expertise and assistance if you’re facing a winding up petition.

We’re insolvency specialists and will explain all your options in this worrying situation. Please contact one of our partner-led team for more information on how we can help – we offer free same-day consultations and operate a nationwide network of offices.

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