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What will happen when my company has been issued with a winding-up petition?

A winding-up order is the result of a successful winding up petition by a creditor against a company in respect of an unpaid debt. The order itself will force the debtor company into compulsory liquidation, the assets will be sold and the company closed down.

Once the order has been issued by the court, it is very difficult for a company to stop the liquidation from happening. If you feel that your company has a future then a compulsory liquidation should be avoided where possible and it is important to take action as soon as the petition is applied for or you feel that one is likely.

Why and how would creditors apply for 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 usually follow months of debt chasing from your 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, 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 but if your creditors think there is a good chance of the debt being recovered, they will see it as an effective solution to the problem.

An application for a winding-up petition is likely to be accepted if a creditor can successfully prove that:

  • 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.

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What happens once the petition has been applied for?

The petition will be advertised in The Gazette which is bad news for any 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 the winding up petition has been issued in the High Court, a date will be set for the court to appoint a liquidator, usually the official receiver (OR), who will wind your company up. Between the issuing of the petition and the date for liquidator appointment, your company will have the opportunity to pay off the debt or defend its actions for not paying the debt.

As both hearings take 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.

What happens next for your company depends entirely on whether you pay the debt or decide to do nothing about the petition.

  • If you pay off the debt to your creditor before the appointment of a liquidator, you will still have to attend the winding up hearing.
  • 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 is possible for another one of your creditors that you owe money to attach or ‘piggy-back’ on the action and substitute their debt for the original one which you have paid off.
  • 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.

Compulsory liquidations and winding up petitions usually should be avoided where possible and there are ways that you can deal with debt issues with your creditors prior to a petition being issued. It is very important that you take action as soon as you become aware that a petition has been issued against your company to have any chance of saving the business and its assets.

Whether you have had a petition issued against you or you think that one may be likely, get in touch with us on 0800 901 2475. Our friendly, professional advisers will be able to offer you free confidential advice to help you deal with your current situation.

Authored by Phil Meekin

Phil Meekin

Head of Marketing