A winding up petition can be disputed where the Company disputes the underlying debt but the Company must show that the debt is disputed on substantial grounds and the dispute is real and not frivolous.
In the case of Enta Technologies Ltd (“ETL”) v Revenue and Customs (2014) ETL applied for an injunction to prevent HMRC from winding it up because the claim upon which the petition debt was based was VAT assessments and ETL had appealed the assessments (albeit out of time); the Tribunal looking at the assessments had given ETL permission to appeal out of time and had indicated that the appeals were not 'hopeless'. Despite the appeal to the Tribunal the HMRC presented a winding up petition. ETL applied for an injunction to prevent HMRC from continuing with the petition.
The court dismissed the winding up petition because there appeared to be a substantial dispute and also noted that the court should not adjudicate on the prospective merits of an appeal that was before a Tribunal.
As a result of this case Courts in the future are likely to be reluctant to deal with winding up petitions presented by HMRC where claims are based on assessments and where the assessments are subject to an appeal through the relevant Tribunal. It is therefore important to ensure that if any claims against your Company are based on assessments that you undertake the correct procedure for the assessments to be properly dealt with. If you do nothing then the court is still likely to make a winding up order whether based on assessments or not.
If a winding up petition has been presented or threatened against your Company contact Leanne Schneider-Rose, Partner, Insolvency Department, Sydney Mitchell LLP on 0121 698 2200.
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