If a winding up petition is presented against your company, you should immediately seek professional advice. As a High Court case showed, any delay in doing so can have consequences that are both catastrophic and irrevocable.
The case concerned a property development company that was wound up at the behest of a trade creditor. Under court rules, any application to rescind that order had to be made within five working days. However, more than two years passed before such an application was lodged, nominally by the company itself but in substance by one of its two directors.
On the basis that all the company’s debts had been paid in full, its liquidator did not resist the application. The Court, however, noted that the power to rescind a winding up order is discretionary and will only be exercised cautiously in exceptional cases. The delay in making the application was extreme and there was no recorded case in which such a lengthy extension of time had been sought.
Rejecting the application, the Court could find no good reason for the delay. To grant such a long extension of time would amount to the creation of a new power to set aside a winding up order in any case in which a company’s debts had been discharged, however long it took to do so.
It was not a case of a company that wished to continue to trade. The motive for the application was to enable the company to realise its sole asset: a potential cause of action against professional advisers which the director had valued at up to £600,000. The company was not in fact solvent in that it had no funds of its own and was dependent on voluntary financial contributions from its shareholders.