Published: 2nd June 2014
we have been targeted a 5th winding up petition without ever issuing a statutory demand. We have managed to pay each of these apart from the last one. we need advice on whether this company has acted lawfully in issuing these winding up petitions and how we can go about defending ourselves from them. I would also like to understand the option of a company voluntary arrangement and whether that can help us.
There is no legal requirement for a statutory demand to be served prior to presenting a winding up petition. The statutory demand is simply used as a way of proving the debtor is unable to pay its debts as they fall due and is therefore insolvent as defined in the Insolvency Act 1986. The only way to prevent a petition being issued is to ensure all liabilities are paid on time (ie within the agreed terms).
If you have cash flow difficulties due to an historic “hangover” of liabilities a CVA may be an appropriate option to consider. You should bear in mind that at least 75% by value of creditors who vote on the proposal for a CVA must support it and therefore if you have one main creditor it is important to engage them before the proposal is circulated as you need to know they are going to support the proposal. Detailed forecasts need to be prepared if a CVA is to be proposed demonstrating the business’s ability to meet current liabilities and make a contribution to pay the historic debts. A CVA would protect you from any creditor action in respect of arrangement liabilities provided contributions to the arrangement are paid.