Winding up petition against a dormant company

[BubbaWY]

Under what circumstances would HMRC issue a WUP against a dormant company?

 

[StevensOnln1]

If that company had an unpaid tax bill and HMRC thought it had significant assets to make it worth the cost of pursuing?

 

[ChrisCallaghan]

If that company had an unpaid tax bill and HMRC thought it had significant assets to make it worth the cost of pursuing?

Just the first part, outstanding tax liabilities.

HMRC do not consider the asset position of a company when considering pursuing a winding up petition (WUP). They are not a commercial enterprise - unlike any other traditional creditor, they are not factoring in the likelihood of a return into their considerations. They will quite happily wind up a company on principle. Statistically HMRC are the most common listed creditor on UK winding up petitions for this very reason.

Under what circumstances would HMRC issue a WUP against a dormant company?

To properly answer your question:

On the basis that there are unpaid tax liabilities and HMRC feel all other collection options have been exhausted.

 

[ChrisCallaghan]

Under what circumstances would HMRC issue a WUP against a dormant company?

Would you mind sharing some more background and context to help myself and other UKBF members to advise you?

For example, are you a director of a company director being threatened with a WUP from HMRC? Are you seeking advice for a friend, family member or similar?

 

[BubbaWY]

Its my local rugby team, Halifax Panthers (Halifax RLFC) who are in court at 10.30am today (I think).

https://www.thegazette.co.uk/notice/4757269

HALIFAX RUGBY LEAGUE FOOTBALL CLUB LIMITED filing history - Find and update company information - GOV.UK

HALIFAX RUGBY LEAGUE FOOTBALL CLUB LIMITED - Free company information from Companies House including registered office address, filing history, accounts, annual return, officers, charges, business activity

find-and-update.company-information.service.gov.uk

 

[ChrisCallaghan]

Oh dear! Poor panthers! You don't happen to be their accountant or solicitor and can introduce me to their board of directors to provide insolvency advice?

Looks like it may be the 2nd hearing - a petition was also listed in August. I'd imagine they'll be seeking an adjournment to buy more time and come to an arrangement. Otherwise, I wouldn't be surprised to see them appoint administrators.

 

[BubbaWY]

I used to be a big supporter, but I am more of a Halifax Town football supporter. They both share the stadium but the rugby club havent paid rent for over a year. So the WUP's havent come as any surprise.

But what is throwing me and others is why they are going after a dormant company, and not the trading company. The accounts have shown creditors or circa £130k for a few years now, which hasnt changed.

 

[ChrisCallaghan]

But what is throwing me and others is why they are going after a dormant company, and not the trading company. The accounts have shown creditors or circa £130k for a few years now, which hasnt changed.

As mentioned, HMRC don't care if a company is dormant or not when considering if to pursue a WUP. If a company has a large enough amount of o/s tax liabilities and the company is not coming to an agreeable arrangement to pay, they will go for WUP on principle. Part of this is to also to trigger the investigation that comes with any liquidation.

 

[ChrisCallaghan]

@BubbaWY you've probably already seen the below, which includes a statement from Damian Clayton:

Halifax Panthers’ financial and stadium outlook laid bare as Championship chief reveals what “isn’t an option”

HALIFAX PANTHERS have been in the news recently regarding their financial and stadium predicaments. The Championship club has been issued with two winding-up orders by HMRC during 2024, with the Pa…

www.totalrl.com

Does seem odd that the last accounts were for a dormant company - certainly doesn't appear to be dormant!

 

[BubbaWY]

Yeah, they want to take over the stadium, yet owe a fortune in rent.

The dormant company was set up at the same time as the trading company (another time they faced financial difficulties). Im not sure of the relationship between the two companies, but if the trading company owes HMRC, would it make any sense that they would issue the WUP against the dormant company? Or would it purely be the fact that the dormant company has some kind of outstanding HMRC debt?

 

[ChrisCallaghan]

As HMRC are going for the dormant co, then it must have the debt. Whether the trading co also has HMRC debt is a different matter.

 

[Michael Loveridge]

Under what circumstances would HMRC issue a WUP against a dormant company?

A client of mine has just issued a WUP against a dormant company who is a tenant of theirs. The company was incorporated in March 2020, but shortly afterwards they lost their right to the income they'd been set up to receive. They therefore had no trading income, and have filed dormant company accounts ever since. They have also paid no rent, despite remaining in occupation.

However, we've become aware that a few months ago a tribunal ruled that they were entitled to the income, and they've since received the backlog of income from 2020 - but they didn't tell my client and they haven't paid the rent, hence the WUP.

 

[BubbaWY]

Does the result of a hearing get published? No news from the rugby club (oddly) which leaves me thinking it was bad news. If it had been a successful hearing, they would have been singing from the rooftops.

 

[Michael Loveridge]

Yes, it's a matter of public record, and if a winding up order was made it'll be published at Companies House, though it takes a few days to be recorded. You can also ring the court, who may tell you the outcome.

 

[ChrisCallaghan]

A contact on Linkedin posted the following yesterday:

The chief executive of the club came out recently to state that the debt to HMRC has been paid in full and with this in mind you would expect the petition to be withdrawn or dismissed as a result.

Can't find the statement myself though!

 

[BubbaWY]

They did release a statement a week or so ago which was very ambiguous. Surely if it had been settled, it would have been removed from the court listing, which is updated daily?

Statement from the Board of Directors - Halifax Panthers

halifaxpanthers.co.uk

 

[Michael Loveridge]

They did release a statement a week or so ago which was very ambiguous. Surely if it had been settled, it would have been removed from the court listing, which is updated daily?

Not necessarily. Although it is possible to have the petition dismissed by consent before the hearing, it's often the case that negotiations carry on to the last minute, so that there isn't time to get a Consent Order dealt with. In those situations the hearing goes ahead, but the respective parties' counsel inform the judge that the case has been settled, and the judge then dismisses the petition.

 

[Lisa Thomas]

They did release a statement a week or so ago which was very ambiguous. Surely if it had been settled, it would have been removed from the court listing, which is updated daily?

Statement from the Board of Directors - Halifax Panthers

halifaxpanthers.co.uk

My understanding is that even if a petition debt is paid, the court will allow the hearing to continue in case a different creditor wants to piggy back onto it.

 

[Michael Loveridge]

My understanding is that even if a petition debt is paid, the court will allow the hearing to continue in case a different creditor wants to piggy back onto it.

That would only happen if another creditor had actually given notice that they wanted to support the petition.

There's always a risk that even if the debt is paid another creditor may crawl out of the woodwork to support the petition.

In many cases they are simply paid off as well, but in the worst case scenario if the company isn't willing or able to pay the additional debt the creditor may force it into liquidation. If that happens then the money that was paid to settle the original debt may have to be paid back to the liquidator.

It's therefore good practice for a creditor who's been paid to ensure that the petition is dismissed by consent immediately payment has been received, so as to avoid that risk. The court will allow the petition to be withdrawn provided no other creditors have given notice that they want to be heard, and provided the petition hasn't been advertised.

 

[BubbaWY]

Adjourned until January 29.

 

[Lisa Thomas]

That would only happen if another creditor had actually given notice that they wanted to support the petition.

There's always a risk that even if the debt is paid another creditor may crawl out of the woodwork to support the petition.

In many cases they are simply paid off as well, but in the worst case scenario if the company isn't willing or able to pay the additional debt the creditor may force it into liquidation. If that happens then the money that was paid to settle the original debt may have to be paid back to the liquidator.

It's therefore good practice for a creditor who's been paid to ensure that the petition is dismissed by consent immediately payment has been received, so as to avoid that risk. The court will allow the petition to be withdrawn provided no other creditors have given notice that they want to be heard, and provided the petition hasn't been advertised.

Thanks Michael. How much notice do they have to give?

 

[Michael Loveridge]

Thanks Michael. How much notice do they have to give?

A supporting creditor can serve a notice in support up to 4pm on the day preceding the hearing of the petition.

 

[Lisa Thomas]

Thank you. So the Court has to allow the hearing until virtually that day?

 

[Michael Loveridge]

Thank you. So the Court has to allow the hearing until virtually that day?

No, if the debt's been paid in full the creditor and company can make a joint application to the court to withdraw the petition. Provided no notices have been received and the petition's not been advertised the court will normally make the order as requested. On making the order the hearing date is automatically cancelled.

 

[Lisa Thomas]

Thanks so it's if the petition has already been advertised I must be thinking of where they leave the hearing open?

 

[Michael Loveridge]

Thanks so it's if the petition has already been advertised I must be thinking of where they leave the hearing open?

Yes, it's because once the petition's been advertised the court won't know till the day of the hearing whether or not there are any supporting creditors.

 

[Lisa Thomas]

Thanks Michael.

 

[BubbaWY]

The hearing in court yesterday was adjourned again. A contact who is far more au fait with these things than I am has suggested it sounds very much like the rugby club are fighting the winding up order using a loophole to say the debts are down to the Coronavirus impact and as such should be exempt from the winding up process.

This is something new to me. Has anyone come across this?

 

[ChrisCallaghan]

Hmmm....

Might be referring to part of the Corporate Insolvency and Governance Act 2020 (CIGA). This placed temporary restrictions on creditors taking winding up action due the impact of Covid, however if memory serves these restrictions ended in April 2022.

HMRC have since been very much back to pre-pandemic norms with how they approach winding up petitions.

Or they could be referring to something completely different that I'm not aware of!

 

[Michael Loveridge]

Your contact sounds to be not quite as "au fait with these things" as he would like you to believe. There were restrictions placed on the issue of winding up petitions during the pandemic, but these ceased to exist in April 2022. Whether or not a company's problems with paying a debt are related to the pandemic is now completely irrelevant.

However, it's not unusual for a winding up petition to be adjourned on several occasions while the company is trying to raise the cash to pay. It's usually in the creditor's interests to agree to an adjournment, as most creditors simply want payment, and if the company goes into liquidation they can usually forget any prospect of that, as whatever assets the company may have will be swallowed up by the IP's charges. It's a truly amazing coincidence how often the IP's bill comes to exactly the same amount as the net assets of the company ...

 

[ChrisCallaghan]

HMRC may consider a WUP against a 'dormant' company if it has outstanding tax debts, which could include VAT, Corporation Tax, or PAYE, even when the company is not trading. Even though it is a 'dormant' company, that itself would not exempt such a company from its liabilities arising in the form of taxes. A WUP might be considered by HMRC on the basis that the company actually has assets or funds to clear debts. For more information about the dissolution of a company, tax compliance, and other legal matters, please contact ICS Legal at:. Protect your business now with professional advice!

Have you read the previous posts in this thread???

 

[BubbaWY]

The petition has been adjourned to a non attendance pre trial review. Any ideas what this means?

 

[Lisa Thomas]

Your contact sounds to be not quite as "au fait with these things" as he would like you to believe. There were restrictions placed on the issue of winding up petitions during the pandemic, but these ceased to exist in April 2022. Whether or not a company's problems with paying a debt are related to the pandemic is now completely irrelevant.

However, it's not unusual for a winding up petition to be adjourned on several occasions while the company is trying to raise the cash to pay. It's usually in the creditor's interests to agree to an adjournment, as most creditors simply want payment, and if the company goes into liquidation they can usually forget any prospect of that, as whatever assets the company may have will be swallowed up by the IP's charges. It's a truly amazing coincidence how often the IP's bill comes to exactly the same amount as the net assets of the company ...

Actually we often don't get paid in full and have to write off a lot of our costs. Therefore the net assets are the limited sums available from which to pay ourselves.

Our costs are also approve by the creditors (or the court) prior to drawing.

We often get it in the neck for our costs, but we don't work for free...

 

[Michael Loveridge]

The petition has been adjourned to a non attendance pre trial review. Any ideas what this means?

It's difficult to be certain without knowing what's going on, but it may mean that the court was not satisfied that the creditor was entitled to a winding up order, and that they have therefore listed the matter for a trial as to whether an order should be made.

A pre-trial review is exactly as the name implies - an opportunity for the judge to review the paperwork with the respective lawyers and make any directions that may be required to get the case ready for trial.