In danger of being forced into liquidation, the winding up petition (“the Petition”) served upon the football club will now be heard on 20th March at the High Court. As many of you know, the Petition relates to unpaid tax bills.
The new owner of the club, Mr Francesco Becchetti, therefore has until 20th March to raise the sum of £250,000, the alleged tax sum due (“the Alleged Debt”), failing which the club could be at risk of being dissolved and as a result relegated. In the event that the club is dissolved, it will no longer have any legal standing and any other claims that could have been made against the club will fall away, unless steps are taken by other creditors to restore the company (or club) onto the Companies’ House register- but that really is a whole other blog!
So what kind of factors will the High Court be considering when deciding whether or not to grant a winding up order?
Can the club afford to pay the Alleged Debt?
If the creditor can show that the statutory demand has not been paid, hence why the Petition was served, then the court will generally presume that the club is unable to pay its debt. Please note that for companies, it is not a strict requirement for a creditor to serve a statutory demand before moving on to the petition stage. Other evidence can be adduced to show that the club is unable to pay its debt e.g. the club’s accounts or even an unanswered Letter Before Claim.
Are winding up proceedings the appropriate procedure?
A creditor should not always use this procedure as a means of enforcing a debt, particularly where there are other means to resolve the matter e.g. Alternative Dispute Resolution. A creditor should consider enforcing against any security held or perhaps even look at repayment plans. Creditors should also be mindful of the fact that where there is a genuine dispute between the parties then a bankruptcy court will not want to hear the matter and it will be immediately thrown out on the basis that this would be an abuse of process. In such cases, the matter will be more appropriately placed before a County Court.
Have any other insolvency proceedings been commenced against the club?
This can include liquidation, administration and company voluntary arrangements. If any of these proceedings have already been commenced, it may not to be possible or appropriate to present a winding up petition against the club.
Whilst the club awaits the outcome of the hearing, which will clearly have a detrimental impact on the club if the result is not favourable, it is important to bear in mind that the mere service of the Petition itself can have detrimental consequences. The most obvious one is the damage it has on the commercial reputation of the club bearing in mind that notice of the petition will have been published in the London Gazette. In addition to this, the club will now have to think twice about trading or disposing of any of its property. If they do, then it may be necessary to obtain a validation order from the court, the purpose of this being so that the club does not dissipate any of its assets pending the hearing of the Petition.
As can be clearly see from the above, there can be dire consequences for any business dealing with a winding up petition. It is for this reason that legal advice be immediately sought. Priya Sejpal is one of the litigation experts at Gelbergs LLP and is happy to help with any queries that you may have. You can contact Priya on 0207 226 0570 or by email at firstname.lastname@example.org.
Published 17 March 2017 by our guest blogger Angel Gray.