What options do you have?
If previous attempts to recover monies owed have been unsuccessful, an unsecured creditor can submit a winding up petition to the courts to have your company wound up. The winding up petition procedure is expensive for creditors – the winding up petition costs are large – and so, this is generally seen as a last resort for creditors to recover unpaid debts that they see no other way of getting paid.
Why have I received a winding up petition?
For a creditor to submit the petition, your company must owe £750 or more. Before the submission of the winding up petition, you will have likely received a statutory demand. From the date you are served with the statutory demand, you will have 21 days to make the repayments or dispute the statutory demand before the matter is taken further. If taken further, the creditor will submit a winding up petition to the court and, if accepted, will be sent to the company. A winding up order typically takes effect within 28 days. In most cases, the winding up petition procedure results in compulsory liquidation. We have outlined the process here in our Compulsory Liquidation Guide.
How to stop a winding up petition
If a winding up petition is submitted against your company, and you cannot pay the debt immediately, you need to seek urgent advice. If you do nothing, a winding up petition will almost certainly result in the business being liquidated and the assets distributed to pay creditors. However, if you speak to a licensed insolvency practitioner (IP) regarding the petition, you may be eligible for an adjournment.
An insolvency practitioner will independently assess your case and present to the court on your behalf, seeking to stop the winding up petition. You should provide the IP with ample notice of the winding up petition and present the best reasons for stopping the winding up petition, as agreements may be possible between the company and its creditors.
It may be possible to place the business into company administration. This can, however, be a costly procedure being that a full hearing is required to justify why the company should enter administration.
Creditors voluntary liquidation
If you agree that the company should be liquidated, Creditors voluntary liquidation (CVL) may be the best solution for your company. This is a formal insolvency process, and is carried out by a licensed insolvency practitioner. A large benefit with a CVL is that it enables you to discuss your options with a professional before you are served a winding up petition. Therefore, you can plan for what the liquidation will entail, and how it will affect your business and your personal circumstances, rather than throwing you at the mercy of the Official Receiver.
Company voluntary arrangement (CVA)
The insolvency practitioner could propose a company voluntary arrangement (CVA). A company voluntary arrangement is an arrangement between the company and its creditors and concerns the repayment of debt. This agreement is overseen by the licensed IP and, in many cases, sees a large amount of company debt written off. The company voluntary arrangement may provide an alternative to compulsory liquidation.
HMRC time to pay
If your debts are to HMRC, HMRC time to pay (TTP) may be a suitable alternative. TTP refers to an agreement with HMRC to spread the money you owe into payments, over an agreed upon timescale. The HMRC time to pay arrangements are, generally, six months or less. HMRC have been known to extend the payments up to 24 months, but this is very rare. HMRC typically accepts the TTP proposals from businesses that have a long-term plan and are seen as viable, so you need a strong case as to why you are eligible for HMRC time to pay.
Consequences of a winding up petition
The consequences of a winding up petition are serious for companies. In most cases, if no action is taken, the procedure results in the complete dissolution of the company. The directors will lose all power as a result and are dismissed. If your company has been issued with a winding up petition, you need act fast.
If you have been issued with a winding up petition, the best thing you can do is seek professional advice. We provide free, friendly advice and will discuss the possible options for your business. Just get in touch with one of our BusinessRescueExperts today.