Although they are currently suspended from being issued until December 2020, a winding up petition is the strongest action a creditor can take against you to ensure payment.
If you’ve received one then you need to understand what your options are.
What is the timeline for a winding up petition?
The timeline for a winding up petition being issued goes like this:
- Statutory demand issued — this gives the company 21 days from receipt to either settle the outstanding debt, make alternative payment arrangements or look to have the demand set aside.
- Winding up petition presented — this can also be advertised in the London Gazette so public word will be out. Worse, this could lead to the company bank account being frozen and being unable to trade.
- Court hearing date set at least seven days later to decide if the company will be placed into compulsory liquidation.
- The judge will listen to the reasons for the petition and if convinced, will order the business to be placed into compulsory liquidation.
- As well as the company being closed down, the official receiver will launch an investigation into the conduct of directors prior to the liquidation — with potential consequences including being banned from being a director for years and being made personally liable for the business’s debts
I've received a winding up petition. What can I do?
Receiving a winding up petition isn’t terminal but you have to respond to it — even if you plan on closing your company, there are more efficient and beneficial ways for you than letting it fall into compulsory liquidation.
The most straightforward message of undoing a winding up petition is to either settle the original debt or come to a payment agreement with the creditor.
If this is your preferred method then you need to act quickly before the petition is advertised.
If it is then even if you clear the debt, other creditors may take over the petition to ensure they are paid too.
If the debt can’t be paid then it’s best to consider the other options available:
If you go down this route then the creditor may be happy to adjourn their action to allow this process to proceed. Among the advantages of a CVL here are that you have more control over the procedure — you can nominate your own liquidator and maintain a say in the direction of events.
A CVA would allow the company to continue trading and repay creditors from profits over an extended period of time. CVAs usually provide creditors with a better return than a compulsory liquidation so they would be naturally more receptive to the idea of receiving more of their money.
The final option would be to place the company into administration if there are sufficient grounds once the winding up order has been presented at court.
If the court agrees then an administration order would be made and the winding up petition dismissed. The company would still be closed and an insolvency practitioner would sell assets to pay off creditors but all legal action against the company would cease.
Once issued, a winding up petition can be withdrawn or set aside, but if you receive a statutory demand followed by a winding up petition then your first action should be to contact us so we can quickly get to work on your response.
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