Can you wind-up a company when the debt is disputed?

Produced in partnership with Kate Rogers of Radcliffe Chambers

Practice notes

Can you wind-up a company when the debt is disputed?

Produced in partnership with Kate Rogers of Radcliffe Chambers

Practice notes

It is a long-established principle that winding-up proceedings should not be commenced where the petition debt is genuinely disputed on substantial grounds. If a purported creditor attempts to do so, the court can invoke its inherent jurisdiction to restrain the presentation of a petition. Further, it is an Abuse of process to seek to use the winding-up court as a debt collection Agency.

However, what constitutes a 'genuine dispute' is subject to argument. This Practice Note looks at some of the situations in which petition debts have been disputed and sets out some of the principles that can be drawn from case law.

Scope

This Practice Note covers the following:

•
winding-up petitions based on a disputed debt: the basic principles
•
the effect that a counterclaim can have on winding-up proceedings
•
how the court will deal with winding-up proceedings where the debtor company is balance sheet solvent, but a debt is due
•
the circumstances in which the court will allow winding-up proceedings based on a substantial dispute to

Kate Rogers

Radcliffe Chambers

Kate undertakes a broad spectrum of commercial litigation whilst specialising in insolvency. She regularly appears in both the High Court and the County Court, with significant trial and injunctive advocacy experience.

Kate’s insolvency practice encompasses, sham transactions; transactional avoidance; preference payments; defrauding creditors; trust deeds; declaratory relief; income payments orders; enforcement; contested winding up proceedings; administration orders; and injunctive relief, both in respect of freezing orders and in respect of the presentation/advertisement of winding up petitions. This includes proceedings in which there is a foreign jurisdictional element and in which it is necessary to advise on the cross-boarder part of the claim.

In addition, Kate has experience of the law of receivership, the appointment of receivers, and their duties. She has successfully acted for receivers in claims brought against them and in obtaining injunctive relief.

Jurisdiction(s):

United Kingdom

Key definition:

Abuse of process definition

What does Abuse of process mean?

There is an abuse of process where the prosecutor can be said to have manipulated or misused the rules of procedure or where inordinate delay has prejudiced the defendant to a situation where a fair trial is no longer possible.

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