Company two years too late to apply to rescind winding up order

A company has been told that it is two years too late to apply to rescind a winding up order against it.

The fact that the delay had been caused by a shareholder negotiating to pay its debts was not a good reason for breach of the time limit.

The case involved Sarjanda Ltd and Aluminium Eco Solutions Ltd.

Sarjanda had been formed to acquire and develop property. Aluminium had obtained a winding-up order against it because of an unpaid invoice.

Under the Insolvency (England and Wales) Rules 2016, an application to rescind a winding-up order had to be made within five days of the order being made.

Over two years later Sarjanda applied for the winding-up order to be rescinded. The delay was explained as being due to a process of contacting and negotiating with creditors to discharge the company’s debts, ill-health and restrictions imposed because of the COVID-19 pandemic.

The company’s debts had been paid in full by funds injected by a shareholder.

The company accepted that the delay was serious and significant but submitted that there were good reasons for it and in all the circumstances the application should be allowed.

The High Court rejected the application. It held that if the application were allowed, it would create a jurisdiction for a winding up order to be set aside in any case in which the debts had been discharged, however long that had taken.

Such a jurisdiction was explicitly provided for in bankruptcy as one of the grounds for annulment, but not in winding up.

There was no good reason for the failure to comply with the time limit.

Please contact Neil O’Callaghan if you would like more information about the issues raised in this article or any aspect of insolvency and company law.