Has your company been issued a winding up petition, but you’re not quite sure what to do? A winding up petition represents the most serious legal action a creditor can take against the company. If you don’t stop a winding up petition, ultimately it could mean the collapse of the business and a cease in trading. A petition could lead to a court hearing, which might result in a winding up order effectively putting your company into compulsory liquidation.
It is important to act fast
If you have received a winding up petition it should not be ignored, as it represents a serious commitment by a creditor to get what’s owed, or put your company out of business. After seven days the company’s situation regarding the winding up petition will be made public, leading to the company bank accounts being frozen. This will put a halt to all trading, as well as potentially stopping any directors from disposing of assets or borrowing against company assets. So it’s hugely important to know the best way to respond.
We can offer you professional advice to quickly handle the situation. If you take immediate action you have the best chance of stopping the petition.
What can I do
It can be a nervous time when issued with a winding up petition. There is the serious prospect of having your company wound up and liquidated. Thankfully there are things you can do. Take a look below and see what the best option is for you
If you act fast and speak to one of our insolvency experts, fortunately there are options available to you.
Pay the petition
If the business has the means to pay off the petitioning creditor, you can do so, but we would always recommend arranging this through an insolvency specialist. In fact once the petition has been issued you should be very cautious about the movement or transfer of any company assets as these may be recovered by the liquidator should a winding up order be subsequently obtained.
A legitimate dispute against the validity of the debt could enable you to apply for an injunction, but this can only be done if you genuinely believe the petition is incorrect. To go down this route, however, you would need help from a licensed insolvency practitioner.
If an agreement to adjourn is made with the courts, it will allow an insolvency professional more time to determine if the business is suitable for administration, which in turn may result in a pre-packed sale or a company voluntary arrangement (CVA), but it will temporarily put a halt to legal procedures against your company, whilst restructuring possibilities are looked into.
Speak with us
We can help you to negotiate with the petitioning creditor. If the debt can be paid within a reasonable time-frame, then it needs to be quickly arranged with the creditor. If accepted there will still be a hearing of the petition, but the court will adjourn in order to give the business time to pay.
What happens if I don’t act?
If you do not act when the petition is first issued, your company could end up in serious trouble. Seven days after the petition has been issued it will be made public knowledge by being published in the London Gazette. Once public, the company will be forced to cease trading, with all accounts frozen.
Around 8-10 weeks later, if nothing is done, there will be a hearing to determine if the court grants a compulsory winding up in order. If so, this results in the company going into compulsory liquidation.
Compulsory liquidation means that the directors will not be able to choose a liquidator themselves and it will effectively stop the company from having any possibility of trading again.
If you do nothing about a winding up petition, you face the prospect of losing your company completely without the opportunity to choose your own liquidator. We could potentially prevent a compulsory winding up order, and in the right circumstances salvage the business.