You may be wondering how to stop a winding up petition that has been issued against your company? Is there anything you can do, in the form of an injunction to prevent a winding up petition? It is important to fully understand this process, and the steps you may be able to take to prevent a winding up process, if this is at all possible.
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Three Key Questions on Winding Up Petitions
What is a Winding Up Petition?
When you are a company in financial difficulties and you owe money to creditors there are several steps that can be taken by them. The most serious action that a creditor can take against your company is to issue a winding up petition in order to recover the money you owe them. If successful, a winding up petition leads to the compulsory liquidation of the company in question.
The process of a winding up petition will only come to pass if a creditor has first attempted to recover money on a number of occasions, either through the issue of a statutory demand or a County Court Judgement (CCJ). A solicitor is then hired to petition the High Court for a winding up order against the company, which is served with advice on when the hearing date will be. From this point there is a seven-day notice period, prior to the creditor advertising the winding up petition in the London Gazette. A hearing takes place between eight and ten weeks after the issuing of the winding up petition to determine whether or not the company will be liquidated.
What Happens if my Company is Issued with a Winding Up Petition?
The first thing you should not do is panic. A winding up petition against your company might seem like a final nail in the coffin of a struggling business, but in many cases, it is a warning sign that gives you plenty of time to work out how to stop a winding up petition and to get your company back on track. You have time to prevent a winding up petition becoming a winding up order. Here are some options for you to consider.
It is beneficial to begin negotiations with creditors as early in the process as possible, so if you believe a winding up petition is due to be issued by one of your creditors communicate with them. Communication is always key, and if you are honest with your creditors about cash flow problems that you believe can be corrected with the implementation of new repayment terms, it is always worth asking. Whatever happens, do not ignore your creditors’ request for payment as to do so will lead to more likelihood of a statutory demand period being invoked (this gives you 21-days in which to pay, negotiate payment terms, take insolvency action or apply for an injunction to prevent a winding up petition).
You may be wondering how to stop a winding up petition once it has been issued, but not yet published in the London Gazette (7-days after being issued). You have 7-days in which to act and prevent the winding up petition from turning into a winding up order. You have the choice to:
Pay in Full – If it is possible you should pay the full total owed to the creditors who issued the winding up petition. This could also include the addition of costs relating to the petition being brought in front of the High Court (around £2,000).
Dispute the Debt – At this point you can also dispute the debt in court. This will be the case if you believe the amount of debt to be incorrect or doesn’t exist at all, or if you believe the petition was incorrectly served. You must have evidence to back up these claims, and can face severe legal consequences without evidence.
Go into Administration – When a company has an outstanding winding up petition, the directors are unable to appoint an Administrator. However, if it is considered that Administration is the most appropriate solution, the holder of a qualifying floating charge may appoint an Administrator, or an application may be made to the Court.
Negotiate a CVA – A Company Voluntary Agreement (CVA) is an option at this point as it allows you to negotiate with your creditors to repay the debt over a longer period of time. This has to be agreed by at least 75% of your creditors and allows breathing space to revive cash flow and give the company a chance to survive and thrive in future. This may not prevent a winding up petition completely if one creditor does not agree with the payment terms. This means that you must attempt to get the petition withdrawn from the court records.
An Adjournment – A separate application to the court can be made to either adjourn the case or cancel the hearing entirely. This would be to provide the company time to raise funds in order to pay off the debts in full, or to give insolvency practitioners time to restructure the company in the most effective way to pay off creditors.
Most of the above options are still available once the petition has been advertised, but they are less likely to be successful at this point, as once advertised, the company’s bank account will be frozen.
How do I find the right advice on dealing with my Winding Up Petition?
A company in financial difficulties wants to be in control of the situation as much as is possible. When a creditor issues a winding up petition against a company your first thought is how to stop a winding up petition. It may seem like a tough and complicated situation to overcome, but you always have options.
Here at The Insolvency Experts, our team of insolvency practitioners offer the experience and know-how to give you some level of control over the situation, keeping you informed of the best routes for your company at all times, whilst looking after the interests of your creditors. For more information, please feel free to call or email us today.