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femi@loftusstowe.com|Companies in England and Wales
Yes, but every payment the company makes after the petition is presented is at risk. It is void if a winding up order follows, unless the court orders otherwise. A validation order is that court order. It lets the company keep paying wages and suppliers while the petition is resolved. I am Femi Ogunshakin, an insolvency solicitor. Your first 30-minute consultation is free.
The company can open its doors the next morning. What changes is the status of every payment it makes from the day the petition was presented. If the court later makes a winding up order, those payments are void unless the court has ordered otherwise.
The bank account usually still works, so it is tempting to carry on as normal. The risk has already started, though. Payments made now are caught in the same way as payments made after the advert.
A validation order can be applied for at any time after the petition is presented. An application made now can be in place before the bank reacts to the Gazette notice.
If you have been served today, get in touch today. The window is measured in business days.
Banks usually freeze a company's accounts once the petition is advertised, on the day of the notice or within about 48 hours. They do this because they do not want to carry the section 127 risk. From then on, wages, rent and supplier payments stop.
A validation order gives the bank the cover it needs to release the account, or to make the payments named in the order. More on this in company bank account frozen.
If payroll is days away, say so when you call. I will tell you straight away whether the timing works.
Yes, if a validation order covers the payments. Routine trading payments, such as wages, rent and suppliers, are regularly allowed in validation orders.
Wages are the example the Practice Direction gives of a payment essential to continued trading. Where payroll is urgent and the full evidence is not ready, the court may grant limited relief for a short period.
Supplier payments the business needs to keep trading are regularly allowed in validation orders. Paying an old debt from before the petition in full is different. The court will not normally validate that at the expense of other creditors.
Payments out are the main risk. If you are unsure whether money coming in is affected, raise it on the first call.
Payments that move value to directors or connected companies are rarely allowed, and only where there is an exceptional case for them. A payment made in good faith in the ordinary course of business is not enough on its own.
Five steps, starting the day the petition arrives. The application at step four is what protects the payments.
Trading on is not wrong in itself. The risk comes from payments made without an order, and from trading on when insolvent liquidation cannot reasonably be avoided.
Opening an account is not the problem. Paying from it is. Any disposition of the company's property after the petition is void if a winding up order follows, unless the court orders otherwise. That applies whichever account the money leaves from.
In a winding up, the court can order a director who misapplied company money to repay it, with interest.
If the company goes into insolvent liquidation, a director can be ordered to contribute to its assets. That applies where the director knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation.
A director has a defence if, from that point, they took every step they ought to have taken to minimise the potential loss to creditors. Read more on section 127 and directors.
A validation order does not decide the petition. The hearing still goes ahead, and the court can still make a winding up order if the debt is left unpaid.
The official receivers' guidance says that in most cases they will cause the company to cease trading and notify the employees. Employment is generally terminated from the date of the order.
Employees of an insolvent employer can apply to the government for a redundancy payment, holiday pay, unpaid wages and statutory notice pay.
That is the position the validation order is there to avoid while the company works on settling or resolving the petition. The consultation covers your other options as well, including Time to Pay with HMRC and raising finance to settle the debt.
Yes. The risk is that payments made after the petition are void if a winding up order follows, unless the court orders otherwise. A validation order lets the company keep trading while the petition is resolved.
Yes, under a validation order. Wages are the example the Practice Direction gives of a payment essential to continued trading. If payroll is close and the evidence is not complete, the court may grant limited relief for a short period.
Routine supplier payments are regularly allowed in validation orders. Paying a supplier's old debt from before the petition in full is not normally allowed at the expense of other creditors.
You can open one, but paying from it does not avoid the rule. Any disposition of the company's property after the petition is caught, whichever account it leaves from.
Wages paid after the petition are payments like any other, so they are void if a winding up order follows unless the court orders otherwise. Routine wages are regularly allowed in validation orders.
No. It does not decide the petition or settle the debt, and the hearing still goes ahead. It buys the company room to trade while the petition is resolved.
A free 30-minute consultation with me to explore your options and protect your business.
The fixed fee for a validation order application is £10,000 to £15,000 plus VAT, depending on the size of the petition debt. See the full fee breakdown.
Who you will deal with
Femi O. Ogunshakin
Solicitor, Tax Adviser and Former HMRC Inspector
Validation order applications are a large part of my practice. Most of the petitions I deal with are brought by HMRC, and my time as an HMRC inspector means I know how the petitioning side builds and runs these cases.
You will deal with me directly rather than with an introducer or a case handler. The work is carried out through Nexa Law, where I practise. The first 30 minutes are free.
If your company has received a winding up petition, it is important to act quickly. Call or email me to discuss how to apply for a validation order from the insolvency courts. I offer a free 30-minute consultation to help you explore your options and protect your business.
07867 795 439
Email femi@loftusstowe.com
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