19th February 2021
When a creditor files a winding up petition at court, they’re taking serious steps to close down your company, and you have very little time in which to act. Once a winding up order is granted, the Official Receiver will begin liquidation proceedings and there is no more you can do to save your company.
During liquidation, all business assets are sold to repay creditors, and the company closes down. But it is possible to arrange an adjournment at the petition hearing that provides more breathing space to consider the next step.
Issuing a winding up petition is an expensive process, and is usually a measure of last resort for creditors intent on recovering their debt, so it’s not an action you can ignore. The investigation that takes place into director conduct provides further incentive to act quickly and decisively, as it can result in disqualification as a director for up to 15 years.
Once the winding up petition has been filed at court, you only have seven days before it’s publicly advertised. HMRC are known to regularly take this course of action to recover their debt, along with other large creditors such as financial institutions.
The issue at this point is that all winding up petitions are publicly advertised in the London Gazette, and are likely to be seen by other creditors. Once your bank becomes aware of the situation, they will freeze your bank accounts to prevent disposal of assets, and protect themselves from further loss.
This makes it impossible for you to trade as normal, as any further transactions need to be approved by the court. So what should you do if a winding up petition has been lodged at court?
It’s imperative to seek professional insolvency advice as soon as possible under these circumstances, as a winding up petition adjournment at court may be achievable. Real Business Rescue has vast experience of this type of court action.
Our licensed insolvency practitioners can provide the professional assistance you need, and will present to the court on your behalf. Ideally, a minimum 48 hours’ notice of the hearing is beneficial to assess your case.
If representations are successful we’ll negotiate with creditors, as if an adjournment is agreed there may be formal insolvency options available. These include a Company Voluntary Arrangement (CVA) or company administration, or an agreement with HMRC for extra time to pay if you have arrears of tax and National Insurance.
The fact that you’ve enlisted professional assistance carries some weight in these matters – particularly useful if your creditor is HMRC, and more likely to challenge an adjournment request.
The court is likely to grant more time to organise your business finances if, presented with documentary evidence by a professional, it’s put to them that you may be able to turn business around.
After postponing a winding up petition, your company’s financial difficulties might be resolved by obtaining additional funding, for example, or by negotiating with HMRC for a Time to Pay (TTP) arrangement.
An HMRC Time to Pay arrangement can provide several months in which to repay arrears of tax and National Insurance, although we may be able to negotiate an instalment plan of up to 12 months in some circumstances.
The main eligibility requirement for TTP is that the business is viable in the long-term, so we would need to present a strong case to HMRC considering your current position. If a Time to Pay arrangement is granted, all legal action is stopped, giving you crucial space to gain further control over your finances.
By presenting a CVA draft proposal at the winding up petition hearing, we’re demonstrating that your business is intrinsically viable, and could become profitable again in the future. This is a condition of entering into an arrangement of this type, and although it may not be a detailed proposition at this stage, an initial draft offers confidence in your ability to repay creditors.
You may be able to access an alternative source of finance that helps you repay your debts. Depending on the type of business you run, this could potentially involve invoice finance where you receive a cash payment each time an invoice is issued. Alternatively, owning assets of significant worth might allow you access to a large cash lump sum to repay your creditor(s).
In this case, a notice of intention to appoint an administrator would be presented at court. Company administration provides a moratorium period where creditor action is halted, including the winding up petition, and an administrator assesses the most appropriate way forward. It’s also possible that you could purchase the underlying business assets using your own funds, and set up a new company under a pre pack administration.
Any of these options may be appropriate depending on your circumstances, and could result in the adjournment or dismissal of the petition against your company.
Compulsory liquidation begins when a winding up order is granted by the courts, so the time available in which to take action is very restricted. Seeking a short adjournment provides the breathing space needed to assess the situation.
Having a winding up petition adjourned allows the time needed to obtain funding to repay the petitioning party, arrange additional time to pay HMRC, or enter a formal insolvency procedure such as a CVA or company administration.
Real Business Rescue is a major part of Begbies Traynor Group, and With 100 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK. We can act quickly on your behalf if a winding up petition has been made against you. Call our expert team for a free same-day consultation to assess the situation, and decide on the best course of action.