Service and giving notice of the petition
A petition must be served on a company at least seven days before the petition is advertised in the London Gazette to allow it to take action to prevent it from being publicised.
Once it is made public knowledge, it is highly likely that the bank will freeze the company’s accounts preventing it from trading. The debtor company may seek a validation order from the court allowing it to continue to trade.
Court proceedings
The company has the right to oppose the petition and prove to the court that it is solvent and should not be wound up. If the company opts for this route, it will be required to file and serve a witness statement on the creditor and file a copy at the court. The court has absolute discretion in winding up proceedings and will consider each party’s arguments and make one of the following five decisions:
- Grant the petition.
- Dismiss the petition.
- Make an interim order.
- Adjourn the hearing either conditionally or unconditionally.
- Make any court order they deem fit.
If the court grants the petition, a liquidator will be appointed to wind up the company and release its assets.
The liquidator is under a duty to investigate the affairs of the company and the conduct of its directors. If the liquidator finds any irregularities regarding the directors’ conduct, it is likely that they will conclude that the directors were in breach of their duties and apply for them to be disqualified from acting as a director for up to 15 years. This means that the directors will be prohibited from:
- Being a director of any company registered in the UK or an overseas company that has connections with the UK.
- Be involved in forming, marketing, or running a company. This includes telling someone else that is appointed as a puppet director how to run the company – something that is often tried by disqualified directors.
If a disqualified director breaks the terms of their disqualification, they could be fined or sent to prison for up to two years. In addition, they and any other director that assists them, will be personally liable for the company’s debts.
It is important that the petition is correctly drafted and that the strict time limits are adhered to. If you require any assistance regarding a winding up petition, do not hesitate to get in touch on 0345 646 0406 or fill in our online enquiry form.