Latest Information

Winding Up Petitions

01/01/2010

A winding up petition is an application to a court to put a company into liquidation. The petition is a legal document that is submitted to a court by those wishing to put a company into liquidation.

The general position in relation to winding up petitions, is that they cannot be used by a creditor to recover payment of a disputed debt. The courts will dismiss a petition where the debtor can persuade the court that there is a genuine dispute over the sum pursued.

This principle can be abused by debtors subject to a petition. The risk for a creditor continuing with a petition in the face of a dispute, is that the court may dismiss the petition and order the creditor to pay the debtors legal costs. Some debtors know this and can use the risk of an adverse costs order to put pressure on a creditor as whether to proceed, even if the dispute raised is speculative. This is particularly the case when the dispute raised is over quality, where it may be necessary to instruct an expert to assist the court to make a determination.

However, the recent case of Vertex Trading SARL v Infinity Holdings Limited [2009] EWHC 461 (Ch), allowed a petition to proceed, even though the debt pursued was disputed. The High Court held that the debtor was clearly insolvent and that a winding up order could be made, even though there appeared to be a genuine dispute. Any dispute as to the validity of the creditor's claim, could be dealt with by the liquidator when considering the creditor's claim in the liquidation.

We will advise you of the risks and options in pursuing debtors. We can enable you to make an informed decision about the most appropriate course of action to take. It is not always appropriate to instigate insolvency proceedings but where it is, we act quickly and efficiently to recover monies owed to you.

If you require advice or assistance in respect of the above or any other Litigation matter, please contact our Litigation team on 01204 527777.