Being presented with a Winding Up Petition is THE biggest indicator that a director needs to take action and seek advice from an insolvency practitioner.
Even if there is only a threat of a winding up petition being issued, guidance should be sought because once the petition is seen by a judge at the hearing, the company may be placed into compulsory liquidation. Which is irreversible.
Once a petition has been issued, time is definitely of the essence and the countdown begins! Let’s take a brief look at the winding up process to find out exactly how you can avoid the company being wound up if you take action early.
If you owe £750 or more and have received several notices that your creditor is demanding payment, it is probably time to start thinking about how to avoid a winding up petition. It is unlikely that a creditor would begin the process for a small amount as the fees involved in filing can cost more than £2,000. Contact us immediately if you are feeling pressure from creditors.
Whether you owe £750 or £75,000, a creditor can serve a written demand for payment if the company has breached or exceeded the credit terms. It is a serious step for a creditor to take but they can petition to wind your company up if this is not resolved within three weeks.
For an application to the court to wind up a company to be successful it needs to be proven to the satisfaction of the court that a company us unable to pay its debts.
There are 4 ways which it can be proven that a company is unable to pay its debts:
1) A creditor owed more than £750 serves a written demand which is unsatisfied;
2) A judgement in favour of a creditor is unsatisfied;
3) The court is satisfied that the company is unable to pay its debts as they fall due;
4) The court is satisfied that the value of the company's debts is less than its liabilities.
The question remains; if you have been issued a winding up petition, is there anything that can be done to stop creditors from forcing you to close down?
If you believe that this is just a temporary setback for your business and it has the potential to be viable in the future, there may be steps we can take to stop the petition from going any further.
The first thing to be aware of is that you only have seven days from the date of service of the petition to file your response with the court. Once seven days has elapsed, the petition can be advertised at which point the company bank account will probably be frozen, as the banks monitor such adverts.
This could have devastating results for the company as no further payments would be able to be made from this account. As you can see, there is no time to waste so contact the insolvency specialists at Real Business Rescue immediately upon being served.
More often than not, there are alternatives which creditors will accept because they simply want their money back. Most creditors are not filing maliciously just to give your company a bad name; they just want to be paid. As a director, you can hardly blame them for wanting what is owed to them because they need to stay solvent as well!
As you can see, a winding up petition is an extremely serious matter and you should take the necessary steps as soon as possible to avoid being issued a petition. Not only can it result in irreparable damage to your company’s good name but if allowed to go forward, a winding up petition can eventually become an order.
If there is any hope at all of saving your business, take action the moment you realise you cannot pay your debts in full or on time.
The best way to prevent your creditors from petitioning the court to wind up your company is to seek expert advice. Real Business Rescue offers a number of invaluable services which are acceptable to creditors (including HMRC) and will keep you out of formal insolvency proceedings.
We may recommend a number of solutions including a Company Voluntary Arrangement which, upon acceptance by members and creditors, can give your company a number of years to repay its liabilities. It is a formal proceeding after which your creditors (named in the CVA) can give you breathing space from creditor pressure.
To learn more about a CVA, see our informative guide which explains the process in more detail; or browse through the information on our website.
Our insolvency practitioners have decades of experience in helping companies throughout the UK avoid being wound up. Whether we suggest asset or trade financing, a CVA, Company Administration or Pre-Pack Administration, you can rest assured it will be the best solution to save your struggling company.
We are available seven days a week to answer any questions you may have and we offer a free consultation. Please call us on 0800 644 6080 the moment you realise you can’t make your payments, and we may be able to help prevent a winding up petition.