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A Winding Up Petition is Serious

Date Added: 09/03/2016  

Many companies receive Winding up Petitions. Official statistics show that there were 385 Winding Up Petitions Advertised in January 2016 for England and Wales. The figures ebb and flow with the state of the economy, with 2,765 winding up petitions being issued in quarter 1 2011, for example, whilst the total for the 12 months October 2011 to September 2012 was 4,230, again relating to England and Wales. Whichever time frame you take, thousands of companies every year receive a Winding Up Petition. Time will be short. This article looks at what that means and how we can help.

A Winding Up Petition is Serious

If your company is struggling to pay its creditors, and this situation is persisting, then at some stage the creditors might well decide to go for the jugular by issuing a winding up petition, which is essentially a precursor to getting the Court to issue a winding up order and force your company into compulsory liquidation.

There’s a government website that outlines how to issue a winding up order, but all it takes is for a company to have debts of over £750 and for proof to be received that the company cannot pay its debts. So if a creditor does take this course of action, it can only mean that their patience has snapped and they are serious about recovering the money owed and/or putting the company out of business. Either way, if your business receives a winding up order, you must act quickly.

What does a Winding Up Petition Mean?

Once a winding up petition has been served at a company’s registered office, if no action is taken, then at the subsequent Court hearing, the Judge will almost certainly issue a winding up order for compulsory liquidation, with the possibility of personal liability for the company’s debts transferring to the directors.

Before the Court hearing can take place, the creditor must allow 7 days for the petition to be advertised in the London Gazette, and the advertisement must appear 7 days before the hearing date, so the time frames in which to take action can be very short.

By the time a company receives a winding up petition, it is almost impossible to put the company into creditors' voluntary liquidation, because the directors:  
  • Cannot sell the company or the assets, as this sale may be reversed by the Court
  • Cannot issue a Notice of Intention (NOI) to appoint an administrator
  • Cannot issue new securities or charges
  • Cannot put the company into pre-pack administration
But it gets worse, because once the petition is advertised in the London Gazette, the bank involved will find out, and in most cases they will freeze the bank account so that the company can no longer trade, in order to protect their position. It is perfectly possible for this to happen before the petition is advertised if the bank finds out that one has been issued. Once this process has started, then the road to winding up has started, leading ultimately to likely investigation of the directors (and possible director disqualification), and potential personal liability for the debts.

How can we help to defend a Winding Up Petition?

All is not lost, but time is of the essence and you must act quickly. As specialists in Business Turnaround, as soon as you contact us we will meet and discuss your options, which include:

-          Contacting your creditors to agree to a stay or an adjournment of the process.

-          If this is impossible, we will help to defend the action and seek costs from the other side or seek a formal adjournment while a solution is proposed and agreed. 

-          Solutions include resolving the claim either by negotiation, or more formally by means of restructuring the business by using a Company Voluntary ArrangementAdministration or Liquidation.

-          We will also get your business operating normally again in as little time as possible. If your business bank accounts have been frozen we will help you unfreeze them with a Validation Order.
 
Once we have achieved the above, then we will work with you to help ensure that your business is stronger and set up to trade successfully so that it does not risk a winding up petition again.

The quicker you contact us, the more we can do to help. If your business has received a Winding Up Petition, contact us or call us immediately on 0800 0385 140.

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