Put simply, a winding up petition is a method that a creditor who is owed more than £750 can utilise to enforce payment of a debt by a company in default. If it proceeds to the hearing stage, then if successful, the court will place the company into Liquidation, which is a terminal process. This is a procedure more often used by creditors such as HMRC and unsecured financial initiations. Jason Elliott, Head of The Insolvency Experts, explains the process and technicalities surrounding winding up petitions and highlights the importance of seeking immediate advice should your company be issued with one. From your perspective, you may have made determined efforts to pay the debt, but have been genuinely unable to. This could be due to having to meet other more urgent debts, an inability to collect monies from your own creditors, a dip in sales or an unexpected increase in expenditure being just some examples. Unfortunately, however genuine your reason for non-payment, this type of creditor action is extremely serious and could signal the end of your business via Liquidation.
The winding up petition is usually prepared by a solicitor and served upon the court, before being sent to the company. It usually takes between four to six weeks for a winding up petition to be heard. If you receive a winding up petition, you must act quickly to save your company. It is essential to seek the advice of an experienced Insolvency Practitioner at this time. Once the court approves the winding up order, the matter will be out of your hands and the Liquidation process will begin. The winding up petition is advertised in the London Gazette no later than five business days prior to the hearing, and this usually results in your bank taking action to freeze company bank accounts. If the company is placed into Liquidation, the Official Receiver will be appointed as Liquidator to sell business assets and investigate the conduct of directors.
What can I do?
Although the outlook may seem bleak at this point, there are still options available: Liquidation of your company can be avoided. A Company Voluntary Arrangement (CVA) for example, can provide extended payment terms of up to five years and can be an opportunity for business recovery;
- The company could be placed into Administration. The Administrator will first of all seek to implement a strategy to rescue the company as a going concern. This halts all legal action, including the winding up petition;
- You can even challenge the existence or amount the creditor is seeking although it is important to be sure of your facts;
- It may be possible and appropriate to obtain funding in order to pay the debt, which is something we can assist with.
Seek Advice from The Insolvency Experts
It can be an extremely stressful and distressing time for any business owner in this situation, but seeking expert professional advice at the earliest indication of a problem can alleviate the stress and achieve the optimal solution. Indeed, there are even circumstances where it is possible to reverse a winding up petition already issued by the court. It is important to remember that the earlier you act, the better the outcome is likely to be. Jason Elliott can provide urgent advice to directors who have been served with a petition and are facing the threat of Liquidation. Contact Jason in confidence on 0300 303 8284 or at firstname.lastname@example.org.