COMPANY INSOLVENCY ADVICE
Winding Up Petitions
If you do not resolve corporate debt problems, creditors can pursue a Winding-Up Order. For Winding-Up Petitions advice and support, contact us today.
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Winding-Up Petitions
How we can help with Winding-Up Petitions
✓ Learn what to expect and how to respond to a Winding-Up Petition
✓ Get advice on working with creditors to secure the best outcome for your business
✓ Discuss strategies to resolve or manage your business’ debts
✓ Explore rescue solutions that could help your company out of difficult financial circumstances
What Happens When A Winding-Up Petition Is Issued?
If your business has debts it cannot pay, it is important to act quickly. If you respond as soon as you notice that there is a problem, there are a number of company rescue solutions that may be available to you. By working proactively and implementing these solutions, you may be able to restore cash flow, manage and resolve debts, and see your business to the other side of this period of financial difficulty. If not, there may be serious consequences. Not only will the problem continue to get worse in most cases, but if creditors are unsatisfied with your efforts to pay back the money you owe, they may decide to take action against you.
One of the most serious steps creditors can take is to apply to the court for a Winding-Up Petition against your business. If the court grants this petition, it will arrange a hearing, during which it will determine whether or not your business has a realistic prospect of paying off its debts. If the court decides you will not be able to pay, it will grant a Winding-Up Order, which will force your business into Compulsory Liquidation.
If you have received a Winding-Up Petition, you must act at once. You will have seven days from the date that the Petition is granted before your business’ financial circumstances become public knowledge. More importantly, you will need to be able to demonstrate to the court that your business is capable of paying its debts if it is to avoid being shut down.
For urgent advice on responding to a Winding-Up Petition or other legal action, or to discuss ways to resolve business debts and prevent creditors from taking this step, speak to us today. The experts at Company Insolvency Advice have many years of combined experience in supporting organisations of all sizes to pay their debts and return to good financial health. This includes negotiating with creditors, advising on ways to improve poor cash flow, and supporting businesses with debt-management solutions like Company Voluntary Arrangements.
Call us now on 0800 999 0666 or use our online enquiry form to request a call back. The sooner you take action, the better your chances of securing the best outcome for your business.
If you want to stop a Winding-Up Petition, the most important thing is to satisfy your creditors, either by paying off your debt or by negotiating new payment terms that will reassure them that you intend to pay them back. There are several options that can help you to change your payment terms, which we will explain below; these depend on your financial circumstances. Alternatively, you may consider challenging the Winding-Up Petition in court if you have the legal grounds (and financial means) to do so. It may be possible to have Winding Up Petitions suspended, but only under certain circumstances.
Before creditors can apply for a Winding-Up Petition, they must request payment through any available channels. If you cannot make your payments, this stage provides you the opportunity to negotiate with your creditors at this stage and secure new repayment terms, if you are able to do so. It is always better to do this than to face the consequences of a Winding-Up Petition because it can be very stressful to try to resolve corporate debt problems while dealing with formal demands for payment or Winding-Up Petitions.
There can be other challenges to face if you are served with a Winding-Up Petition. Notice of the Petition will be published in The Gazette, which can also create negative publicity and make it harder for your business to operate. At this stage, people can search the central registry of Winding Up Petitions and find your business’ name there. In turn, all of this can make financial challenges worse. Further, once a Winding-Up Petition has been issued, you will be required to attend a court hearing to determine whether your business can feasibly pay its debts.
You must attend the court hearing even if, upon receiving the Petition, you pay your debt to your creditor in full. In such cases, other creditors may use the Petition to recover any money you owe to them, in a process called ‘substitution’. For these reasons, it is best to try to resolve corporate debt problems quickly and amicably. If you need advice on the best ways through a difficult financial situation, contact us today. We can confidentially discuss how you and your business can move forward, and learn which of the options below might be best to help you pay your organisation’s debts.
It is always best to resolve any issues with credit and debts before your creditor begins issuing statutory demands and winding up petitions. This is only possible if you act quickly, but it is sometimes enough to restore your business to good financial standing.
Company Voluntary Arrangements
A Company Voluntary Arrangement (CVA) is a payment plan between a business and its creditors. It sets out payment terms for a debt and divides it (in whole or in part) into monthly instalments, to be paid back over a set period of time. This has advantages for both the business and the creditor: for businesses, paying in instalments is usually more manageable and the company can continue to trade while the debt is paid off. Meanwhile, creditors can feel reassured that they will receive the money they are owed without needing to take any further action.
If you think a CVA could be a viable solution to your company’s debts, talk to us today. We can confidentially discuss your business’ financial situation, determine a realistic instalment amount and suggest a fair period of time over which you can pay. From there, we can draft a proposal for a CVA and negotiate with your creditors on your behalf to reach an agreement.
Financing Solutions
You may be able to raise cash to pay off your creditors. In some cases, this is the fastest and simplest solution for a business, as it avoids the need to negotiate or reach an agreement with creditors, and there are a number of possible solutions to consider. These include:
- Invoice factoring and discounting
- Crowdfunding
- Asset finance
- Private investment
We can advise you on the financing methods that are most suitable for your organisation, based on your financial situation and help you to determine whether this approach is the right solution to resolve your debt challenges. It is often possible to have Winding Up Petitions adjourned if you are able to pay your debt at this stage.
In Company Administration, an appointed Insolvency Practitioner takes control of a business to try to steer it towards recovery. When a business enters Administration, any legal proceedings against it are halted, meaning that a creditor cannot apply for a Winding-Up Petition. If your business’ financial difficulties are ongoing and difficult to resolve, this may be the best step for you to take, but it will not be appropriate in all cases.
With Pre-Pack Administration, a buyer is identified and the sale of the business and its assets is agreed upon ahead of the business going into Administration. The sale is completed as soon as the business is put into Administration, at which point the funds raised from the sale are used to pay any creditors to which the business owes outstanding debts. In many cases, company assets are sold to another business, but the company’s current directors are also allowed to purchase them.
The advantage of Pre-Pack Administration for a business is the reassurance that it can continue to operate after it goes into Administration. For creditors, agreeing a price for the business beforehand means that they can be certain they will receive the money they are owed.
Legal Challenge
Depending on the specific circumstances, there may be legal grounds to challenge a Winding-Up Petition in court. This may apply, for example, if your company has substantial grounds to dispute the debt, or if you have a right of set-off (meaning that the creditor owes you more money than they are demanding as a repayment). If you believe that a creditor is trying to use a Winding-Up Petition as a threat to force you to pay quickly, this may also have legal consequences. By issuing a successful challenge, you may be able to have the Winding-Up Petition withdrawn, and the notification of your financial status will no longer need to be published in The Gazette.
There are several potential legal responses to statutory demands and Winding Up Petitions, but these depend on your unique situation. Thanks to our experience, we can assess your circumstances and help you to determine whether or not you have the legal grounds to challenge a Winding-Up Petition. However, you should contact us before you receive the Petition, as soon as you realise that your business will be unable to pay its debts, if possible.
Thankfully, there are possible solutions available at all stages of the process, so if you are unable to take action before you receive a Winding-Up Petition, there are still viable ways to respond. The best outcome for everyone is usually that the business resolves its debt challenges, continues to trade, and returns to a good financial standing – to achieve this, you should seek expert advice on the options that will be most viable for you.
Whether you are facing the first warning signs that your business will not be able to pay its debts, or you have already received a Winding-Up Petition, we can advise you on the potential outcomes and help you to plan your path forward.
The winding up of a company is typically a last resort for creditors. There can be significant costs involved, so creditors will usually only take this step if they believe that you are intentionally avoiding paying your debt, or that your financial circumstances mean you are unlikely to fulfil a request for payment. Before a creditor can apply for a Winding-Up Petition, there are other steps they must take to try to secure repayment of the money they are owed. This can give you an opportunity to negotiate and resolve the debt amicably before you face the potentially very serious consequences of a Winding-Up Petition.
Briefly, the stages of the process are as follows:
- The creditor requests payment of the debt.
- If this is unsuccessful, the creditor can issue a 21-day statutory demand for payment.
- At the end of the 21-day period, the creditor can apply for a Winding-Up Petition if the debt remains unpaid. Copies will be sent to the High Court and the debtor’s registered company address.
- A date is set for a court hearing (usually 8-10 weeks later).
- Seven days after the petition is granted, a notification can be published in The London Gazette.
- Financial institutions freeze the company’s bank account, bringing operations to a halt.
- Depending on the outcome of the hearing, the court may grant a Winding-Up Order and force the business into Compulsory Liquidation.
The first step for creditors is to request payment. It is in your best interests to try to resolve the problem when you receive this request, if you can – whether by using financing to raise the money, proposing a CVA, or through any other means. If you are unsure how to proceed, contact Company Insolvency Advice for free, confidential guidance.
If a creditor’s requests for repayment are unsuccessful, and the debt amounts to £750 or more, the creditor can send a 21-day statutory demand for payment. This constitutes a formal demand and creates a framework for a Winding-Up Petition by establishing the existence of the debt in a legal document. If the debt is not paid within this 21-day period, the creditor has the right to apply for a Winding-Up Petition against your business.
An unmet County Court Judgement (CCJ) may also prove the existence of the debt for the purposes of the law, and if a creditor holds an unpaid CCJ against your business, they do not need to send a statutory demand.
Once the court has issued a Winding-Up Petition, a hearing will be arranged. As we have said, attending this hearing will be mandatory, even if the dispute has been resolved by the time the hearing takes place.
If a creditor is pressuring you to repay a debt, it is important to react quickly. The sooner you act, the more options you will have available to resolve your debts and recover your company. This means that you should seek professional advice as soon as you realise that your business may be unable to pay its debts – if you wait until a creditor requests payment, issues a statutory demand, or applies for a Winding-Up Petition, you may be more limited in the actions you can take to rescue your company.
How long does a Winding-Up Petition take?
The winding-up process can take anywhere from a few weeks to a few months. Note that these timeframes are approximate and the actual duration can vary based on a multitude of factors including legal delays and the complexity of the case. As with any court process, delays can arise in securing a Winding-Up Petition hearing date, and there are other stages in the process where things can slow down.
If a Winding-Up Order is granted, the subsequent liquidation process can take significantly longer; often a year or more for complex cases. Once control over the company is handed over to a licensed insolvency practitioner, it will be their responsibility to manage the company’s bank accounts, liquidate the company’s assets and pay outstanding debts. Their ability to do this quickly depends on a lot of different factors relating to the company’s financial situation.
Ultimately, this process will change according to the specifics of the insolvent company, debts it owes and other factors. Company directors who are looking for a specific estimate of how long this might take should seek Winding-Up Petition advice from an expert, such as the team at Company Insolvency Advice. We have worked with many company directors in situations similar to yours.
What happens when a Winding-Up Order is granted?
When a Winding-Up Order is granted by a court, it initiates the formal process of liquidating the company. The order signifies that the company is insolvent and cannot meet its liabilities. The company will be put into compulsory liquidation, which means it will cease operations and its assets will be sold to repay creditors. Here is the process that typically happens once a Winding-Up Order is granted:
- Appointment of a liquidator: when the Winding-Up Order is granted, the Official Receiver initially acts as the liquidator of the company. The Official Receiver may continue in this role or appoint a licensed insolvency practitioner to act as liquidator. The latter is more likely if the company has substantial assets.
- Company’s assets secured: the liquidator takes control of all the company’s accounts and assets with the aim of securing and preserving them for the benefit of the creditors.
- Ceasing operations: the company must cease operations immediately. Employees will be dismissed, and employment contracts will usually be terminated.
- Investigation: the Official Receiver or the appointed insolvency practitioner will conduct an investigation into the company’s affairs. This includes why the company became insolvent and whether any improprieties have occurred, such as fraudulent or wrongful trading.
- Creditor claims: creditors are invited to submit their claims, detailing the money owed to them by the company. The appointed liquidator will evaluate these claims and admit them as appropriate.
- Asset liquidation: the company’s assets are sold, and the proceeds are used to repay creditors. This is done in a specific order defined by law, typically starting with the costs of the liquidation itself, followed by employee claims and then unsecured creditors.
- Distribution of funds: if there are any remaining funds after the payment of liquidation costs and the settlement of validated claims by the company’s creditors, they will be distributed to shareholders.
- Dissolution: once the liquidation process is complete, the company is formally dissolved, and it ceases to exist as a legal entity. A notice of the dissolution is published in The Gazette.
Following this process, directors may face restrictions on acting as directors of other companies, depending on the findings of the investigation. If misconduct or fraud is uncovered, directors may be held personally liable and may face disqualification as a result. However, in most cases, directors are free to start a new business or to become a director again without facing any legal penalties.
The process is complex and can be lengthy, particularly if the company has significant assets or if there are disputes among creditors.
It is also important to say that this process can be avoided. If you are a business director who has received a Winding-Up Petition, contact Company Insolvency Advice today to talk about your options and learn how you can avoid liquidation.
If your business is served with a Winding-Up Petition, contact us immediately. Your circumstances will determine how you should respond, and guidance from experts can help you to overcome the difficulties you are facing and restore your company.
We have years of experience in helping companies of all sizes to manage debt problems and deal with Winding-Up Orders, so we can help you to understand the process and its potential outcomes. Call us today on 0800 999 0666, or use our online enquiry form to arrange a call back at your convenience.
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