Cancelling a company winding-up order?

Cancel a winding up orderCancelling a company winding-up order involves a meticulous legal procedure aimed at undoing the consequences of such an order issued by a court.

Typically, when a winding-up order is sanctioned against a company, an official receiver assumes the role of a liquidator, taking charge of the company’s assets and initiating an inquiry into its activities.

However, the process of rescinding a winding-up order offers a lifeline to the company, permitting it to overturn the order’s ramifications and continue its business operations.

This recourse might become relevant when the company’s stakeholders, including directors and creditors, assert that the initial order was based on misjudgment or when circumstances have drastically altered since the order’s pronouncement.

The intricate course of action encompasses the submission of a formal application to the issuing court, accompanied by substantial evidence substantiating the appeal’s grounds. Alongside this, any outstanding debts or expenses linked to the winding-up must be settled.

The court evaluates the justification for cancellation, and if convinced, it possesses the authority to retract the winding-up order, effectively reinstating the company to its former operational state, as if the order had never been issued.

Can a winding up order be reversed once issued?

Yes, it is feasible to overturn a court-issued winding-up order.

Legal proceedings can be halted through two methods:

  1. Application for Rescission: Anyone has the right to apply for rescinding the order within seven days. This is based on the grounds that the court lacked all relevant facts when deciding to issue the order.
  2. Application to ‘Stay’ Proceedings: The Official Receiver, an appointed liquidator, a company shareholder, or a creditor can apply to ‘stay’ liquidation proceedings at any point after the winding-up order, allowing for both temporary and permanent cessation of proceedings.

It’s crucial to act promptly to enhance the chances of success in preventing a winding-up order. Taking action at the Statutory Demand stage can significantly impact the outcome.

Your IP might recommend a Company Voluntary Arrangement or another insolvency procedure, alleviating the creditor’s concerns about non-payment.

Rescission of the winding-up order

In accordance with section 12.59 of the Insolvency Rules 2016, the company holds the option to pursue the reversal of a winding-up order. The specific procedure for seeking this reversal, known as recession, is outlined in paragraph 9.10 of the Practice Direction:

  • 9.10.1 Application Requirement: Initiating the process involves submitting an application formally. This application must adhere to specific guidelines.
  • 9.10.2 Timing Considerations: The application must be lodged within five business days from the date of the initial order. If this timeline is not met, the application should include a request for an extension of time, following the guidelines of Schedule 5 in the Insolvency Rules. Noteworthy is the obligation to inform the petitioning creditor, any supporting or opposing creditor, the incumbent insolvency practitioner, and the official receiver of any such extension application.
  • 9.10.3 Eligibility and Support: An application for recession will only be entertained if it comes from a creditor, contributory, or jointly from the company with either a creditor or a contributory. To support the application, a witness statement is required. This statement should encompass comprehensive details about the company’s financial standing, assets, liabilities, and, if applicable, reasons for any delay in submitting the application within the stipulated five-day window.
  • 9.10.4 Cost Implications: In the event that the application for recession is unsuccessful, the costs incurred by the petitioning creditor, supporting or opposing creditors, the incumbent insolvency practitioner, and the official receiver will typically be ordered to be borne by the creditor or contributory who initiated or joined the application. This allocation of costs is intended to prevent placing the burden of the costs of an unsuccessful application on the general body of creditors.

These guidelines within the Practice Direction meticulously delineate the procedural intricacies for pursuing the recession of a winding-up order, ensuring transparency and adherence to the prescribed legal framework.

Who can apply to rescind a winding-up order?

The option to seek the rescission of a winding-up order is extended to three distinct entities:

(a) a creditor,

(b) a contributory,

(c) jointly by the company with either a creditor or a contributory,

This is specified in paragraph 7.2 of the Practice Direction – Insolvency Proceedings. It’s crucial to emphasize that applications originating from any other party or solely from the company will not be entertained or sanctioned by the Court.

This delineation ensures that the right parties with legitimate standing can participate in the process of applying for the order’s rescission, maintaining the integrity of the legal proceedings.

Application must be made within 5 business days

The requirement for making the application falls within a span of 7 days (as stated in r.7.47 (4)).

In the legal case of Metrocab Ltd and another [2010] EWHC 1317 (Ch), the Court underscored the vital importance of submitting a prompt application within five business days from the issuance of the order.

In his judgment, Philip Marshall QC, serving as Deputy Judge of the High Court, highlighted that the interests of justice demand swift action in seeking the rescission of a winding-up order.

Such an order significantly impacts all creditors and immediately empowers the Official Receiver. Without this prompt stipulation, considerable uncertainty would arise for both creditors and the Official Receiver, along with any subsequent liquidator appointed.

In this instance, the Court declined to exercise its discretion to rescind winding-up orders against two companies. The refusal was grounded in the absence of substantial differences in circumstances from the time when the original orders were issued, thus failing to adequately provide the Court with all pertinent facts.

It’s imperative to recognize that a winding-up order will only be rescinded by the Court if the applicant successfully demonstrates that the company’s circumstances have undergone substantial and material changes since the initial order was made.

Late applications to rescind a winding-up order

In cases where an application to rescind a winding-up order is not made within the required 7-day timeframe, it is still possible to apply for an extension of time under rule 4.3 of the Insolvency Rules 1986.

This involves submitting a fee-paid application, along with supporting evidence explaining the delay in making the application for rescission.

Evidence required to support the application

To bolster an application aimed at rescinding a winding-up order, a pivotal step involves furnishing a comprehensive witness statement that meticulously delineates all pertinent facts substantiating the application.

This statement conventionally encompasses a comprehensive portrayal of the company’s financial standing, notably its solvency status, assets, and liabilities, as stipulated in paragraph 7.2 of the Practice Direction.

In cases where an extension of time is concurrently being sought, the accompanying evidence should transparently elucidate the reasons behind the delay. Importantly, it’s imperative to recognize that the evidence presented must originate from the primary source and be officially filed, while also ensuring that copies are served to the requisite parties as stipulated by notice requirements.

It’s generally noteworthy that facsimiles or duplicate evidence are typically not accepted for formal filing. This meticulous process ensures the authenticity and accuracy of the information presented to support the application for the winding-up order’s rescission.

Parties that must be served with the application and evidence

As outlined in paragraph 7.1 of the Practice Direction, the procedure for applying to rescind a winding-up order involves serving the application and accompanying evidence to key stakeholders. This encompasses the Official Receiver, the petitioner, and any creditors who either lend support to or oppose the application.

During the hearing, evidence demonstrating the service of these documents becomes essential, particularly if neither the Official Receiver nor the petitioner is present.

This step underscores the importance of transparency and adherence to procedural norms, ensuring that all relevant parties are informed and included throughout the process of seeking the rescission of the winding-up order.

Costs consequences of the application

The financial implications tied to an application for the rescission of a winding-up order are contingent upon the unique context of each case. Broadly speaking, in the event that the application does not achieve the desired outcome, the party responsible for initiating the application is likely to bear the costs attributed to the Official Receiver and/or the petitioner.

This practice is designed to allocate the financial responsibilities in alignment with the outcome of the application and underscores the principle of accountability within the legal process.

Stay of winding-up proceedings

As per section 147 of the Insolvency Act 1986 (IA 1986), the creditor, contributory, or the company’s liquidator hold the authority to initiate an application to suspend the ongoing liquidation proceedings and request a stay of all related activities. This provision reads as follows:

“The court may at any time after an order for winding up, on the application either of the liquidator or the official receiver or any creditor or contributory, and on proof to the satisfaction of the court that all proceedings in the winding up ought to be stayed or listed, make an order staying or sisting the proceedings, either altogether or for a limited time, on such terms and conditions as the court thinks fit.”

In the exercise of this discretionary power, the Court takes into account several key considerations:

  1. Solvency Status: The Court evaluates the financial standing of the company. If the company is solvent, it assesses whether creditors have been duly satisfied or if alternate arrangements have been established to fulfill their claims.
  2. Public Interest: The Court weighs whether granting a stay of proceedings is aligned with the broader interests of the public.
  3. Appropriateness of Jurisdiction: The Court examines whether there might be a more suitable jurisdiction to address the ongoing proceedings, taking into account factors such as legal frameworks and practical considerations.

By evaluating these aspects, the Court determines whether it’s justified to grant a stay of proceedings, thereby pausing or limiting the progression of the winding-up process. This discretionary power aims to ensure equitable and just outcomes in the complex landscape of insolvency proceedings.

Appealing a winding-up order

When faced with the issuance of a winding-up order against a company, the option of appealing the order comes into consideration. However, appealing a winding-up order constitutes a multifaceted and intricate endeavor, guided by specific legal provisions and procedures.

In alignment with paragraphs 52.21(3)(a) and (b) of the Practice Direction, the Court possesses the authority to entertain an appeal if it deems that the preceding court’s decision was either incorrect or unjust due to significant procedural or other irregularities.

To initiate an appeal against a winding-up order, the company or its directors must formally petition the court for permission to appeal. This necessitates presenting compelling evidence that substantiates either a misconception in the issuance of the winding-up order or the existence of valid grounds for an appeal.

Should the court grant the permission to appeal, the next step involves meticulously assembling a case and presenting it before the court. This entails demonstrating, through evidence, that the winding-up order was erroneously granted or that there exist viable grounds for an appeal.

A favorable outcome in the form of the court overturning the winding-up order permits the company to persist in its operations. Conversely, if the court upholds the winding-up order, the company will proceed with closure, leading to the liquidation of its assets to satisfy its outstanding debts.

However, it’s crucial to underscore that embarking on the path of appealing a winding-up order entails substantial expenses and a significant investment of time. In light of this, obtaining proficient legal counsel is of paramount importance. Seeking expert advice aids in making an informed decision, ensuring that an appeal is a prudent course of action aligned with the best interests of the company and its stakeholders.

Need help with a winding up order

If your company is facing the challenge of a winding-up order and you believe there are compelling reasons to reverse this situation, seeking assistance for cancelling the order becomes crucial.

The process of rescinding a winding-up order involves intricate legal steps, including presenting a strong case to the court supported by evidence of the company’s solvency, financial position, and any procedural irregularities. As highlighted in the Practice Direction and related legal provisions, the application must be made promptly within a specified timeframe.

The success of your application can greatly depend on adhering to procedural guidelines, serving the relevant parties, and providing clear evidence.

However, navigating this process can be complex and demanding. Thus, it’s advisable to seek professional legal counsel to ensure you follow the correct procedures and make a compelling case for the cancellation of the winding-up order.

This course of action will help you determine the best strategy to safeguard your company’s interests and explore all available options before proceeding to get started simply complete the online enquiry form.

Insolvency & Restructuring Expert at Business Insolvency Helpline | + posts

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.