Dealing with a Winding Up Petition
Receiving a winding up petition is a very serious matter. If you do not take immediate action to respond it is very likely to be terminal for your business.
If you owe money to a creditor which you cannot pay (and the debt is not disputed) that creditor can issue a winding up petition. If you are still unable to pay the debt or reach an agreement with the creditor, a court hearing will follow at which a judge may order the company placed into compulsory liquidation. A compulsory liquidation is terminal for the company and will mean that its operations are brought to an end immediately and control of its assets is taken over by the Official Receiver.
What is the effect of a winding up petition?
Just receiving a winding up petition can itself be terminal for a company unless it is handled properly and quickly. When the petition is advertised (which must be at least seven days after it has been served on a company and seven days before the haring) it’s very likely that your bank will freeze the company’s account and the company’s credit rating will also be immediately downgraded. In other words you could very quickly be in a position where you cannot make any payments and suppliers will refuse to supply you, leaving the company paralysed.
In addition, any transactions that occur once a winding up petition is issued can be reversed if the company is subsequently put into liquidation. That includes any payments made to suppliers or any sales that are made.
What are your options?
It should be clear from the above that a winding up petition can very quickly create insurmountable problems if you don’t take action immediately. But there are steps which you can take to limit the damage:
- If a petition relates to a disputed debt you can instruct a lawyer to have it dismissed.
- If your business is viable, but you need breathing space to resolve cash flow issues, you may be able to obtain immediate legal protection to stop the petition form going to a hearing by entering a formal company rescue procedure such as administration or a statutory moratorium to give you time to reach agreement with creditors.
- If the debt is genuine and you think the company just isn’t viable anymore, then you can takes steps to initiate a voluntary liquidation where you will have more control over the process. This is also consistent with your statutory obligations as a director.
A winding up petition is extremely serious. There are options to deal with it, but you must act very quickly: once banks or suppliers become aware of it the situation can quickly spiral out of control. Contact us now to see how we can help. We’ll talk you through your options on a no-obligations basis and try to help you solve the problem.
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