Receiving a winding up petition (WUP) is one of the most serious threats a company can face – especially if you weren’t expecting one.
Creditors can pursue a winding up petition for unpaid debts of as little as £750 and if no action is taken to address the debt then it’s likely that a court will order your business to be closed down.
It’s that serious.
What is a Winding Up petition?
A WUP is a legal demand from a creditor for the repayment of a debt.
The courts will notify you of the petition and its impending hearing date. Remember – ignoring it or failing to comply could ultimately result in the compulsory liquidation of your business.
If you do make the decision to ignore the WUP and your company is forced into liquidation the liquidators will first use the company’s assets to cover the costs of the liquidation, and then the remainder will be used to pay as many of the company’s creditors as possible.
How do I stop a Winding Up Petition?
If you’ve received a WUP the first thing to do is don’t panic.
There are several options available to deal with the threat, depending on your situation and circumstances. These include:
- Pay the debt
If you can pay the full amount of the debt plus the costs of the petition within seven days, then the petition can be withdrawn from the courts by the creditor before it gets to the hearing date. This will also prevent the petition from being advertised in the London Gazette and any other creditors or customers being alerted to it.
- Request an adjournment
In some instances you may be able to submit a request to adjourn or cancel the WUP hearing. In order to do so you must be able to provide a full statement setting out the reasons why.
The most popular grounds for an adjournment are:-
1) To allow time for repayment in full via third party funds or an asset sale to take place
2) To allow time to put a company voluntary arrangement (CVA) in place.
The court will review your arguments and if it believes your company is viable and could repay the debt if it has more time then it will consider the case for an adjournment.
- Time to Pay Arrangement (TTP) or Company Voluntary Arrangement (CVA)
If the creditor that has raised the winding up petition is HMRC then you could come to an agreement with them to repay the debt over a longer time period in set instalments. This Time To Pay arrangement (TTP) is not automatic and has to be arranged with HMRC but is possible.
Alternatively, the company could consider a company voluntary arrangement (CVA) to repay the debt. In this process all a company’s debts are combined into one debit and a proportion of them is written off in return for the rest being repaid in a series of regular monthly repayments.
By entering into administration, all legal action against the company is ceased including the WUP.
This gives the business valuable breathing space, which allows the Insolvency Practitioner (IP) to evaluate the state of the business, to see if the company can be rescued.
Alternatively you could go down the Pre-pack administration route. This is when the appointed IP prepares the business and its assets for a sale to a suitable buyer. The new company can then continue trading without the threat of the WUP.
- Creditors Voluntary Liquidation (CVL)
If you cannot pay off the debt and your company is no longer financially viable you can still have control of the situation by closing your business through a creditors voluntary liquidation (CVL) instead of being forced into it by the courts.
Now you know that receiving a winding up petition doesn’t have to be a death sentence for your business but it still has to be dealt with seriously and immediately.
The most important thing to do is to get some expert advice to discuss exactly what your next steps should be.
After establishing what your individual circumstances are, we’ll be able to provide you with some clear options about what you can do next but it is important you act quickly to ensure you have as many options as possible.
Then you can get back to doing what your business does best.