When a company receives a winding-up petition (WUP), it is the most serious action a creditor can take to recover an unpaid debt. After the petition goes through court, if unchallenged a winding-up order follows, which eventually forces the debtor company into compulsory liquidation. Once the order has been issued by the court, it is very difficult for a company to stop the liquidation from happening.
Why and how would creditors apply for a Winding-Up Order against my company?
The winding-up of a company is not usually something that will occur out of the blue. It will normally follow months of debt-chasing from creditors in the form of letters, demands, as well as the possible issuing of a CCJ and/or bailiffs visiting your business premises. If all of these attempts to collect the debt fail, one or more of your creditors may apply for a winding-up order against your business.
The cost of issuing a winding-up petition is quite high so it is often used as a last resort.
An application for a Winding-Up Petition is likely to be accepted if a creditor:
- The debt is unchallenged by the debtor company
- The debtor company is not willing or is unable to pay or discuss terms
- Attempts have been made, by the creditor and/or a third party working on their behalf, to recover money that is owed.
What happens once the petition has been applied for?
A lot happens in a very short space of time, which is why it’s imperative that you ask fast. We go into more detail below.
Advertisement in the Gazette and freezing of accounts
Once the petition has been issued and served, it will be advertised in The London Gazette, no less than 7 days before the petition hearing. The Gazette advertisement is bad news for your company because as soon as this happens your bank and any lenders will freeze your company accounts. This will make it difficult for you to trade as you will not be able to pay debts or receive any monies into your account so in effect the business will usually cease to trade. Once you become aware of a petition against your company, there are options available to you to take control back before your company is forcefully wound-up.
Once the WUP has been issued in the High Court, a hearing date will be set for the court to consider the petition, issue a Winding-Up Order (WUO) and appoint a liquidator – usually the official receiver (OR) – who will wind your company up. Between the issuing of the petition and the hearing at court, your company will have the opportunity to pay off the debt or defend its actions for not paying the debt.
Contact us urgently for advice if you are even threatened with a WUP.
As the hearing of the petition takes place at the High Court, your company will require the presence of a barrister. This additional cost can make defending your company’s actions very expensive when a petition has already been served.
Pay or be wound-up
What happens next for your company depends entirely on whether it can repay the debt.
- If you repay the petitioning creditor before the hearing, you will still have to attend the court.
- You should be aware that once the petition has been advertised, even if you pay off the initial debt, this may not get the petition removed. It’s is possible that any other creditors who are owed money may look to take action on the back of the winding up petition already issued. For this reason it is always wise to involve an insolvency practitioner or solicitor if you are considering paying a creditor after a petition has been issued.
- However, if you choose to do nothing about the petition, a liquidator will be appointed by the court who will sell the assets of your company, investigate you and any other directors for any wrongdoing and ensure that your company is dissolved, with any monies realised being distributed amongst creditors.
What happens if I do nothing?
After receiving a WUP, if nothing is done, the advertisement of the company will still run in the London Gazette following the procedure. The court will grant a WUO, which results in the company being liquidated. Once a WUO has been issued, there is very little that anyone can do. The faster the reaction to a WUP, the better options a business has of avoiding facing compulsory liquidation.
When your company has been issued with a WUP, you are facing the most serious action a creditor can take to recover money they are owed. The petition will first be advertised in the London Gazette, which will also result in company bank accounts being frozen. Once the WUP has been issued, a date will be set for a hearing and if the petition is successful, the appointment of a liquidator who will then liquidate your company. Even if a petition has been issued there is still time to act before the court hearing. Contact us without delay to discuss options for your company.
How we can help
If you are worried about the prospect of a WUP, or you have already received one, then it’s important to act as quickly as possible. Doing nothing will lead to your company being compulsory liquidated by the courts. If you believe your company still has a viable future and can be salvaged, then you must take action to stop the WUP before the court approves it and issues a WUO. Contact us now for free, actionable guidance and advice. We have the experience and expertise to help you.