My company just received a winding up petition that is notifying us that we are going to be formally wound up soon. We’ve believe this means that the company is going to be liquidated and dissolved. What exactly is the winding up petition? It appears to be an official court notice? Do we have any options now that the petition has been served?
A winding up petition is simply an application that a creditor presents to the court when they are owed over £750. They are also required to serve this petition at the registered office of the indebted company at least 7 days before advertising it – at which point it takes effect.
By law, if a company cannot meet its financial obligations and/or its liabilities exceed its assets it is considered legally insolvent. An insolvent company can be forced into compulsory liquidation by any of their unsecured creditors .
The process simple; a written demand requesting payment of a debt greater than £750 is made and your company fails to comply with the demand, they can petition to wind up your company.
Once you have received a winding up petition you cannot sell the company or its assets and you can only enter into voluntary liquidation. If the petitioner agrees to withdraw the petition, which they oftern will if you pay their costs which can vary enormously. If the You can either pay the amount due, or the court will make a winding up order.
Fortunately though, a creditor cannot advertise the petition until they’ve waited 7 days after serving it on your business. So you have a short period to act. Once the petition is advertised the bank will find out and then freeze the company’s bank accounts, in compliance with section 127(1) of the Insolvency Act of 1986. After the week has passed and the petition has been advertised there is very little that can be done to reverse the process of being wound up and put out of business.
If you’ve received a winding up petition within the last week then you need to consult with an insolvency practitioner immediately to begin working on a company voluntary arrangement or an alternative process. A CVA which may allow you to negotiate with creditors through an official agreement that would revise your repayment terms. Many creditors choose to support with a CVA rather than go through the lengthy process of liquidation, especially if the terms presented are feasible.
12th December 2018
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4th December 2018
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