Q&As

What are the consequences of a winding up petition on a proposed restructuring?

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Published on LexisPSL on 22/11/2013

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • What are the consequences of a winding up petition on a proposed restructuring?
  • Why is it relevant?
  • What are the consequences?
  • Appointment of an administrator
  • Disposition of company property
  • Can the winding up petition be withdrawn?
  • Practical guidance

STOP PRESS: From 6 April 2017, the Insolvency Rules 1986, SI 1986/1925 were revoked and replaced by the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. The content in this Q&A may have been affected by this change.

Why is it relevant?

A company in financial difficulties will inevitably have a number of creditors banging on the door for payment. While restructuring discussions are ongoing with creditors and in the absence of any formal insolvency process, there remains the risk that a creditor will present a winding-up petition at court in an attempt to force payment from the company. This will have consequences for any proposed restructuring as discussed in this Q&A.

What are the consequences?

There are a number of consequences of a winding up petition being presented at court by a creditor and in the context of a restructuring, the key consequences are:

Appointment of an administrator

Following the presentation of a winding-up petition at court (which has not been disposed of), the company and the directors of the company are prevented from appointing an administrator using the out-of-court route under paragraph 22 of Schedule B1 to the Insolvency Act 1986 (IA 1986). If the parties wish to appoint an administrator to the company as part of any proposed restructuring and wish to use the out-of-court route, the only party able to do this would be

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