Computer Servicing South East Ltd, Re Insolvency Act 1986

Where a company has been ordered to be wound up but credible evidence shows that proposed funding may restore solvency and improve creditors’ position, the court may adjourn an application for permission to appeal to allow an application for rescission of the winding-up order. It may extend the time for that application, stay the winding-up proceedings and accept undertakings preserving the company’s position. If the funding is not forthcoming, permission to appeal is likely to be refused.

Computer Servicing South East Ltd applied for permission to appeal against a winding-up order made by His Honour Judge McGonigal in the High Court, Chancery Division, on 7 September 2001. The order followed a petition by Customs and Excise concerning a debt of approximately £44,848.

The company relied on an agreement under which Madame Paola Monsoreau proposed to subscribe £200,000 for shares. That investment would make the company solvent and improve the position of its creditors. The central issue was whether the permission application should proceed immediately or be adjourned to allow the company to seek rescission of the winding-up order under rule 7.47 of the Insolvency Rules.

1. Application adjourned. The Court of Appeal adjourned the application for permission to appeal for further hearing on 16 October 2001.
2. The court accepted evidence that the proposed £200,000 investment was available and would be made, although the necessary formalities might take several weeks. On the figures then available, the investment would make the company solvent and leave the creditors better off than an insolvent liquidation.
3. In those unusual circumstances, it was in the interests of the creditors to give the company an opportunity to apply under rule 7.47 of the Insolvency Rules for rescission of the winding-up order if the investment was made. Time for that application was extended under rule 7.47(4) until 16 October 2001.
4. The winding-up proceedings were stayed so that the company could pursue the rescission application. Undertakings given to the Official Receiver were accepted and were to be recorded in the order.
5. If the investment did not materialise, the strong probability was that rescission would be refused and the permission application dismissed. If rescission occurred before 16 October, the further permission hearing would become unnecessary.

• High Court, Chancery Division: His Honour Judge McGonigal made a winding-up order against the company on 7 September 2001 on the petition of Customs and Excise.
• Court of Appeal (Civil Division): The application for permission to appeal was adjourned to 16 October 2001. Time for an application for rescission under rule 7.47(4) of the Insolvency Rules was extended, and the winding-up proceedings were stayed.