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Defending a Winding Up Petition
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Can you get a Winding Up Petition withdrawn, stopped or dismissed?
It is possible to defend your business against a Winding Up Petition, but you must act quickly. If you ignore the petition, it will be advertised seven days later and your bank will usually respond by freezing your company’s account, making it very difficult to trade. The petition will then be heard in court, where it will be dismissed or approved. If the court approves the petition it will make a Winding Up Order, and at that point, it will be very difficult to save your company from liquidation.
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A creditor can issue a WUP for debts that exceed £750, although, in reality, the costs associated with serving a petition mean the amount is typically a lot more. Most creditors only resort to issuing a petition against a creditor as a last resort, usually after they have made several unsuccessful attempts to collect a debt.
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The simple answer is yes. However, if you have been issued with a petition or feel one is imminent, you must act now.
Paying the petition is the simplest way to get it dismissed, but there are other options available. You should seek professional advice immediately if you cannot afford to pay the debt in full or you dispute the debt. A licensed insolvency practitioner will be able to advise you on the course of action you should take.
Once you have received a Winding Up Petition, there is a seven-day time limit to do one of the following:
Pay the debt in full
Paying the amount you owe in full, plus the creditor’s costs for bringing the petition, will prevent the creditor from advertising the WUP in the Gazette. Alternative funding streams, such as invoice finance or asset-based lending, can provide a quick cash injection to help you make the payment. If you pay the debt and no other creditors wish to pursue the debt, the court will dismiss the petition.
Negotiate an informal repayment arrangement
If you cannot afford to pay the debt in full but want to settle it, it’s worth trying to negotiate an informal repayment arrangement to pay what you owe over time. That may be enough to persuade them not to advertise the petition in The Gazette. However, as they’ve already made multiple attempts to recover the debt, the creditor may doubt your ability to stick to the agreement.
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Challenge the petition
You can challenge a Winding Up Petition on four grounds:
- You disagree that you owe the creditor money;
- You dispute the debt amount;
- The creditor also owes you money, which cancels the debt or reduces it to less than £750;
- There’s a procedural error or delay, such as the details on the WUP are inaccurate, or the petition was not issued correctly.
If you intend to challenge the petition, you must file a witness statement with the court at least five business days before it’s due to be heard. You should also provide evidence of your reasons. This is a serious step and one you should only take if you have substantial evidence to support your reasons for disputing the WUP.
Propose a Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement is a formal insolvency procedure that you can set up with the help of an insolvency practitioner. They will propose an affordable repayment plan to your creditors to pay part of or the entire amount you owe via monthly instalments over a typical period of between three and five years.
In this case, it’s not just the creditor who issued the petition who has to accept your proposal. If 75% of your creditors agree to the CVA, the court can decide to dismiss the WUP.
Enter into Company Administration
Administration gives the company some breathing space so you can put a recovery plan in place. When you enter administration, an eight-week moratorium begins, causing all legal action against the company to cease, including the Winding Up Petition. That gives an insolvency practitioner time to determine if and how they can rescue the company.
Consider Pre-Pack Administration
Another option is a process called Pre-Pack Administration. It involves the sale of the business or its assets to a suitable buyer, who is often a director of the existing business. The new company can then continue trading without the threat of the Winding Up Petition, albeit under a new name. You must appoint an insolvency practitioner to assess the company’s suitability for sale and arrange the deal before putting it into administration.
Request an adjournment
It may also be possible to submit a request to the courts to adjourn or cancel the Winding Up Petition hearing. You will need to provide a full statement setting out your reasons why. The court will consider an adjournment if it believes your company is viable and could repay the debt if it has more time.
Liquidate the company voluntarily
If you cannot pay the debt and the company is no longer financially viable, liquidating it voluntarily via a Creditors’ Voluntary Liquidation can be an effective last resort. In terms of the consequences for you personally, A CVL is usually preferable to being forced into Compulsory Liquidation by the court.
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If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080
If you’ve been threatened with or have already received a Winding Up Petition from a creditor, there are options available to you. We will assess the circumstances of your debt and the company’s financial position to help you determine the best way forward. Call our experts today for a free, same-day consultation.
Further Reading on Defending a Winding Up Petition
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