Compulsory Insolvency and Validation Orders

Following service of the winding up petition a company will find its bank accounts frozen by the bank. Additionally, after the presentation of a winding up petition any subsequent transactions by that company are voidable by virtue of s.127 Insolvency Act 1986.

These prevent a company from disposing of any assets, making payments such as wages, utility bills and payments to suppliers and effectively stops the company from trading.

A validation order application may be made to court when a winding-up petition is presented against a limited company. Its purpose is to allow (or ‘validate’) those payments and other transfers by the company that would still be necessary for it to continue to trade up until the date that the winding up petition is determined at a Court hearing.

Once a validation order is obtained the sealed order may be obtained that day and sent to the company’s bank to permit payments, notwithstanding its account being frozen.

As Insolvency Solicitors we have a great deal of successful experience in obtaining validation orders. We work with businesses that are subject to winding up proceedings and are able to provide expert and practical advice on this technical area of law.

For more information on validation orders please contact Raheel Khan at Dumonts Solicitors.

This article is for general information and does not constitute legal advice.