London Solicitors Discuss Injunctive Relief in Winding Up Proceedings

Injunctive Relief in Winding Up Proceedings

Today our London insolvency solicitors look at what to do if your company has been served with a winding up petition and you do not accept responsibility for the debt.

Suffice to say, immediate action is required.

What to do when you receive a statutory demand

Generally, a creditor relying upon a statutory demand must wait 21 days before it can issue a winding up petition. During that time, if you dispute the debt, you should correspond with the creditor about the debt. You may be able to enter into negotiations, or if you cannot, you should seek a written undertaking from the creditor not to issue or advertise a winding up petition while the disputed issues are being addressed.

If you cannot resolve the dispute and the creditor does not want to give an undertaking, it may be wise to apply to 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.

Obtaining the injunction

Applications for injunctions to restrain winding-up petitions, or to restrain advertisement of winding-up petitions in the London Gazette, 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 a 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 purpose.
  • 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 which a Court would not hear, such as enforcement of a judgment that is now out of time, it cannot proceed with the petition.

One of the critical points to remember with statutory demands and winding up petitions is that you must act swiftly. Delay may result in liquidation of a company or compromise a company’s entitlement to recover costs if it successfully obtains and injunction.

We hope that you found this article helpful. You can contact South Bank Legal, a Central London commercial law firm, if you wish to confidentially speak to an appropriately qualified insolvency or company statutory demand solicitor.