Updated: 19th January 2020
A winding up petition (WUP) is the most serious step a creditor can take against a company that fails to pay them the money it owes. Should you have a WUP issued against your business and fail to respond to it appropriately, a winding up order can be made against your company which could see it forced into compulsory liquidation.
Once a winding up petition has been served against your company, your options are limited. Not only that, but it is a race against the clock to put a plan in place if you want your company to continue to trade. However, a WUP does not necessarily have to signal the end of your business; there are ways to move forward which will allow you to continue to trade in the future.
If you are able to pay the debt the WUP relates to, then this is the simplest way of allowing trade to continue. Be aware that it costs a company in the region of £2,000 to issue a WUP. If you want to clear the debt and have the WUP set aside, you must also be prepared to reimburse these court and administration costs the petitioning company has incurred. Of course, for many businesses, paying off a substantial debt in one fell swoop is easier said than done. Depending on your company’s overall financial situation, you may be able to consider funding options to help you pay the amount owing. However, if your company is insolvent, or you envisage issues paying off any additional form of finance, you should steer well clear. Contact an insolvency practitioner for further advice if you are unsure whether this is a viable option for you.
Challenging a winding up petition is only an option if you have solid proof that the debt does not exist, or if you have a legitimate dispute regarding the alleged amount of the debt. You may also challenge the petition if you believe it was served to you incorrectly. The rules surrounding this are complex, so you should enlist the help of a professional before lodging any challenge. An insolvency practitioner will be able to advise you whether you have a genuine claim which would allow you to dispute the debt, or whether it would be more appropriate to consider alternative options.
If your business is viable, it may be possible to enter into a Company Voluntary Arrangement (CVA). A CVA allows you to restructure your company’s liabilities by negotiating with creditors to pay off your debts at a more affordable rate. This typically involves your creditors writing off a portion of the debt, so they are only likely to agree to this if they believe your business to have a good potential for success in the future and if they can expect to receive more money from you by agreeing to a CVA rather than if your company was forced into liquidation.
Once a company enters administration, a legal ring fence known as a moratorium is placed around the company. This prevents further legal action and provides the breathing space needed to put a plan in place. Company administration is not suitable for every business; an insolvency practitioner will be able to discuss this option with you in more detail and assess whether this is appropriate for your company.
If you are successful in having an outstanding WUP dismissed, you should still see this as a major wake-up call. There is nothing preventing another disgruntled creditor from starting the process against you in the future. If your company is struggling with mounting debts, you should take decisive action to rectify this problem for good. A licensed insolvency practitioner will be able to talk you through your options and put a plan in place to get your business out of the red and back into the black. Call our expert advisers on 0800 644 6080 today to arrange a free no-obligation consultation at any of our 50+ offices.
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