We’ve been unable to pay a particular bill for three months now because our operating expenses are so high that we simply can’t sacrifice other obligations for it. Recently a debt collector informed us that they will be attempting to wind up my company if I do not pay the requested amount within three weeks from now. Is there a way to stop my creditors from issuing a winding up petition even if I don’t have the money to pay?
Unfortunately, if you do not come to an agreement with your creditor or make the payment they will probably issue a winding up petition, which will begin the process of forcing your business into compulsory liquidation. During compulsory liquidation the court orders all of the company assets to be liquidated and the business is permanently dissolved. To stop this from happening you’ll need to either attempt independent negotiations by speaking with creditors on your own behalf, or you’ll have to propose a company voluntary arrangement (CVA) with the assistance of a qualified insolvency practitioner or one of the alternative insolvency processes that may rescue your business.
After serving the petition to the official address of your business the creditor must wait 7 days before they can advertise it. Once the petition is advertised the bank will take notice of the procedure and respond by freezing your company’s bank accounts, in accordance with section 127(1) of the Insolvency Act of 1986. The only way to stop the accounts from being frozen is to satisfy the demands of the creditors so that they do not advertise the petition.
If the creditor has not yet served you a winding up petition but is threatening to do so, then you may want to enter administration as this creates moratorium on any legal actions they might take against your company for at least 8 weeks while an arrangement is sought. Arranging a CVA during administration is sometimes easier because the company is under complete control of an insolvency practitioner who knows how to negotiate with creditors and draft professional proposals.
If a CVA cannot be arranged during administration the insolvency practitioner may try to arrange sale of the business without the debt burden that had been hampering the company's ability to trade. Ultimately, the only way to avoid a winding up petition or stop it from happening is to take action as soon as the creditor starts applying pressure.
12th December 2018
Small and medium-sized enterprises (SMEs) across the UK are paying increasingly large sums of money to collect amounts owed to them by their clients and customers.Read More
4th December 2018
The number of independent retailers who closed down outlets during the first half of this year reached a record high level for any comparable period.Read More