Validation Order within 72 hours – case study

19th February 2024

Kuits’ dispute resolution team received instructions by a Residential Care Home looking after elderly, infirm and those suffering from Dementia that a Winding Up Petition had been issued against it by a substantial creditor.

The Care Home owed money to a creditor, but publicizing a Winding Up Petition could have been disastrous for the business. This would have led the bank to freeze the company’s accounts, affecting the Care Home’s ability to function and impacting over 50 staff members and 30 residents who rely on medication and care services. To prevent this, an urgent online application was made to the Court in London, including witness statements, and a hearing was scheduled within 24 hours. Notice of the hearing was given to all relevant parties. In a brief 30-minute hearing the next day, a Validation Order was granted, allowing the Care Home to continue operating despite the Petition.

What is a Validation Order

It’s a legal approval from the court that allows a company facing a Winding Up Petition to make necessary transactions, like payments from its bank account, without later challenges during insolvency. This is crucial when banks might freeze accounts due to insolvency proceedings, ensuring the company can keep trading.

How do you get a Validation Order?

Submit an application under the insolvency procedure, along with a statement from the company director. If possible, involve an accountant to forecast potential transactions. The application must be listed at the court where the Winding Up Petition is filed. Notify the Petitioner, the bank, and other relevant parties. Quick action is vital, as a Winding Up Petition can be advertised within 7 days.

Best Tip

Act fast. Negotiate with the Petitioner if possible, but be prepared to make a court application within 7 days to prevent business disruption. Showing the court that allowing the business to operate won’t harm unsecured creditors is crucial. Special circumstances, like those in this case, will also be considered by the Court when granting a Validation Order.

Should you have any queries or are in need of urgent assistance, please do not hesitate to contact Manisha Modasia or Dermot Preston in the Dispute Resolution Team at Kuits.

Kuits FSQS registered
Kuits good employment supporter