Who can apply for an injunction to restrain presentation of a petition?
Two very interesting points come out of judgment of Snowden J in the recent case of Shorts Gardens LLP v London Borough of Camden Council . This case revolved around an application made by the directors/shareholders of Shorts Gardens LLP for an injunction to restrain presentation of a winding up petition against it.
- Firstly, whilst one would ordinarily expect the respondent to a disputed winding up petition to be the debtor company itself, this case clarifies that neither a director nor shareholder of the debtor company has the right to do so in his or her own name. The Judge held that simply being a director or shareholder of a company does not give that person sufficient personal interest to apply for an injunction to prevent winding-up proceedings against the company.
The court found that the legal right being invaded here is the right of the debtor company; such right being not to be subjected to the winding-up process other than at the instigation of an undisputed creditor. Directors are not personally entitled to any benefit by reason of holding office and the making of a winding-up order does not deprive shareholders of their shares.
- Secondly, the court refused to grant the injunction to restrain presentation of a winding up petition on the basis of the COVID-19 pandemic. It held that proposed insolvency legislation relating to COVID-19 would likely be limited to certain sectors, and preserved for matters concerning statutory demands and petitions based on landlord claims for rent arrears. It was noted by the court that it seemed that a threshold test is envisaged by the Government under which restrictions would only apply where the reason that a company is unable to pay its debts is due to COVID-19. In the instance of this case, the reason Shorts Garden LLP had not paid its debts was not related to COVID-19.
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