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Winding Up Petitions

A winding up petition is a legal action taken by a creditor that is owed an unpaid debt. A winding up petition is the most serious action that a creditor can take against your company; it could lead to your company being forced into compulsory liquidation by the court.

Once a winding up petition has been issued, there is a seven day period before the company’s financial situation becomes a matter of public knowledge. The court sets a hearing date to decide whether a winding up order should be granted against the insolvent company, and if so, company is forced into compulsory liquidation.

Therefore if your company is served with a winding up petition, it is vital that you speak to a licensed insolvency practitioner immediately for advice and guidance. We have years of experience as insolvency practitioners - we can assess your case, advice you on your options and where possible, help you to take measures to save your company. You can contact us at any time via telephone, email or online live chat.

When Can a Creditor Apply For a Winding Up Petition?

A winding up petition is not the first port of call for a creditor. Usually, a creditor will have made repeated requests, via a number of channels, for payment of a debt. In order to apply to a court for a winding up petition against another company, creditors must meet certain criteria:

  • The debt must be to the amount of £750 or more
  • The creditor must send a 21-day Statutory Demand for payment of the debt

So if a company has an unpaid debt of more than £750 with a creditor, that creditor can issue a Statutory Demand. A Statutory Demand is a formal demand for payment of the debt. The Statutory Demand proves that the debt exists, so if the demand is not met, the debt exist in law, and this allows the creditor to take winding up action. Therefore if the debt is not paid within21 days of the issuing of the Statutory Demand, the creditor has the right to apply to the court for a Winding Up Petition.

If the creditor already holds an unmet County Court Judgement (CCJ) against the company, they do not need to send a statutory demand for payment, as the unpaid CCJ effectively confirms the existence of the debt instead.

If your company is facing pressure from creditors for payment of unpaid debts, it is vitally important that you take action quickly and contact a licensed insolvency practitioner, in order to prevent this process from developing. The faster you act, the more options you may have available to you and the greater the chance that you will be able to save your company from compulsory liquidation. If you fail to take action and the court forces your company into compulsory liquidation, there are no measures that can be taken to rescue the company from closure. As licensed insolvency practitioners, we have years of experience in advising company directors on financial issues and guiding companies through insolvency procedures. You can contact us at any time via telephone, email or online live chat to discuss your case.

Who can apply for a winding up petition to be issued against your company?

Any creditor to whom your company owes a debt of £750 or more could take action to have a winding up petition issued against your company. This could be trade suppliers, HMRC or your bank.

The creditor may believe that your company has deliberately avoided payment, or that, due to a poor repayment history, your company is unlikely to comply with their requests for payment of the debt. The costs involved in issuing a winding up petition are significant, so a creditor would not usually enter into this process lightly. They may feel that it is the only course of action left to them that would allow them to recover the debt owed to them.

However there are some cases where creditors issue a winding up petition in a vindictive attempt to make their debtor pay quickly. If you have unexpectedly received a petition to wind up your company and suspect that this is may be the case, we can help you to deal with the situation.

It is important to note that once a winding up petition has been served, the court hearing will take place even if you pay the petitioning creditor in full. This is because other creditors can still step in and use the petition to recover their own debts. This is known as 'substitution'.

Despite the severe implications of a winding up petition being issued against your company and the limited amount of time that you have to act, we may still be able to stop the winding up petition and rescue your company from being wound up. This is why it is so vital that you contact immediately if you are served with a winding up petition The longer you leave it, the less opportunity there is to rescue the company.

The Process of Issuing a Winding Up Petition

Creditors must follow a certain process in order for a winding up petition to be issued against a company that owes them a debt. The outline of this process is as follows:

  • The creditor makes unsuccessful attempts to recover the debt, and issues a 21-day statutory demand for payment (unless they already hold a CCJ).
  • If, by the end of the 21 day period, the debt remains unpaid or no repayment plan has been agreed, the creditor will appoint a solicitor to complete the application for a winding up petition against the debtor.
  • The application for a winding up petition is sent to the High Court and is then served at the debtor’s registered company address. A date for the court hearing is set, which is usually 8-10 weeks later.
  • Seven days after the winding up petition has been served, the hearing date will be advertised in the London Gazette and the situation becomes public knowledge.
  • Following the advertisement in The Gazette, the bank will freeze the company’s accounts, effectively preventing any further trade.
  • If no action is taken by the debtor, or if attempts at company rescue solutions fail, a winding up order will be granted by the court. This will force the company into compulsory liquidation. At this point, nothing can be done to save the company.
  • The court appoints a company liquidator to wind up the company and liquidate its assets for the benefit of creditors. The liquidator will then have the company removed from the register at Companies House, at which point the company will cease to exist. The liquidator will also investigate the conduct of the directors in the time leading up to insolvency. This potentially leaves directors open to personal liability and accusations of misconduct, wrongful trading or other serious allegations in relation to the running of the company.

It is vital that you take action quickly if your company is facing pressure from creditors, receives a Statutory Demand for payment of a debt, or is issued with a winding up petition. You must contact an experienced insolvency practitioner for advice and guidance. The longer you wait without taking steps to recover the situation, the less likely it is that you will be able to save the company from compulsory liquidation. This also leaves you open to accusations of misconduct from the liquidator during the compulsory liquidation process. You can contact us at any time via telephone, email or online live chat for expert advice on winding up petitions and help with saving your company from being wound up.

What Can Be Done To Stop A Winding Up Petition?

The best way to stop a winding up petition and save your company from being forced into compulsory liquidation is to satisfy creditors at the earliest opportunity. You can do this either by paying the debt outright, by coming to an agreement on more manageable payment terms, or by entering into a formal insolvency process. You could also fight the winding up petition in court, if you have grounds to do so. However this can be costly and may not be achievable, depending on the circumstances.

Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) is a payment plan that can be agreed between an insolvent company and its creditors by a licensed insolvency practitioner. A CVA sets out payment terms for all or part of the debt, allowing the insolvent company to repay the debt via regular monthly payments over a period of time. This allows an insolvent company to recover from its debt problems by making its debt more manageable. The company can continue trading to work through to solvency, without being forced into compulsory liquidation. As your appointed insolvency practitioner, we would look into your company finances to determine what your company can afford to pay back over a fair amount of time. We would then draft a proposal and negotiate with your creditors on your behalf to come to an agreement on a Company Voluntary Arrangement.

Financing Solutions
There are a number of ways that companies can raise cash in order to pay off creditors and avoid compulsory liquidation. These methods include invoice factoring, crowd funding, asset finance and private investment. As experienced insolvency practitioners, we can assess your company’s situation and determine the best finance options for you.

Company Administration
Company administration is an insolvency rescue procedure where an insolvency practitioner is appointed to take over control of the business, with the aim of rescuing the business from insolvency and maximising the value from the business assets. One of the major benefits of company administration is that, once a company is put into administration, all legal proceedings against the company are halted. This prevents a winding up order from being issued against the company. As licensed insolvency practitioners, we can act as your company liquidator during this procedure in order to get the company back to solvency, pay off debts to creditors, and prevent compulsory liquidation.

Pre-Pack Administration
Pre pack administration is a procedure whereby a sale of all or part of the business and its assets is arranged prior to the company being put into administration. Once the company is put into administration, the business assets are immediately sold and the funds are used to pay off debts to creditors. As your appointed insolvency practitioner, we would value the business and its assets, and arrange for the sale of the assets to another entity. The company’s current directors are allowed to purchase the company’s assets under a new company. This is a commonly used method of ensuring that a business can continue.

Fighting the winding up petition in court
If a winding up petition has already been issued against your company, you may be able to argue against the winding up petition in court if you can prove that a substantial dispute exists surrounding the debt, or the grounds on which the application is based. It must be shown that your company has a counter-claim against the petitioning party, or that the debt in question can be set-off against monies already owed to your company by the creditor. This would also allow you to get an injunction placed against the advert in The Gazette. We can help by assessing your case and determining whether you have grounds to argue against the winding up petition in court. This is a complex process that needs to be completed under strict time limits, with specialist legal assistance.

The best time to take action to avoid your company being put into compulsory liquidation is as soon as you realise that your company is going to fall behind on its payments to creditors. By taking action before creditor pressure piles on, there is a greater chance of being able to agree manageable payment terms and avoid legal action by your creditors. Though, we may still be able to find alternative rescue solutions once a winding up petition has been issued. For more information on winding up petitions and company rescue procedures, contact us ASAP via telephone, email or online live chat.

Creditors' Voluntary Liquidation

If your company is insolvent, experiencing pressure from creditors, and there are no feasible insolvency rescue procedures that could save it, then a creditors’ voluntary liquidation may be the best course of action.

Creditors’ voluntary liquidation is the process of voluntarily closing down your insolvent company. The advantage of choosing to close down your company, rather than waiting for your company to be forced to close by a winding up order, is that it puts you in control of the situation. It could also work in your favour during the liquidator’s investigation into the actions of company directors.

When you enter into a creditors’ voluntary liquidation, you will have the help and guidance of an experienced insolvency practitioner of your choosing from the start, so you will be much better prepared. With a compulsory liquidation, the liquidator is often appointed by the court, and you will have less time to prepare for the liquidation process.

What Happens If A Winding Up Order Is Granted?

If company rescue measures fail and the court grants a winding up order, a company liquidator will be appointed by the court to put the company into compulsory liquidation.

The liquidator will assess the company's assets and have them professionally valued prior to their sale at auction.

Once the sale of business assets has taken place, the liquidator will make distributions to company creditors in order to pay off the debt. When this has been completed, the company is struck off the register at Companies House and will cease to exist.

As part of the compulsory liquidation process, the company liquidator is required to investigate the conduct of all directors during the time leading up to insolvency. They will interview directors and look at evidence to establish how the company ended up in its financial situation. They will also determine whether there was any wrongdoing, misconduct or fraudulent activity by the directors.

The Possible Consequences of a Winding Up Order For Directors

Once a winding up order has been issued the company will be liquidated, and the liquidator will carry out their investigations into the company and the actions of the directors. Under the Company Director Disqualification Act, 1986, a company director could be penalised for various types of director misconduct, including wrongdoing, trading whilst insolvent and fraudulent trading.

The consequences for a director if they are found to have acted wrongfully or fraudulently could include:

  • The director could be disqualified from becoming the director of another company for a period of up to 15 years.
  • The director could be held personally liable for company debts that were incurred whilst the business was insolvent.
  • Fines for trading fraudulently
  • Prison sentences for serious fraudulent activity

What To Do If Your Company Is Served With a Winding Up Petition

If your company is served with a winding up petition, you should contact us immediately for expert advice and guidance. We have years of experience as insolvency practitioners in helping companies of all sizes with their debt problems and dealing with winding up orders. You can speak to us via telephone, email or Live Chat for more information about the options available to you. We can meet you at your office on very short notice to look at your situation, advise you and guide your company through a range of company rescue procedures.

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