Will a winding up petition go ahead now the courts are closed?

The Coronavirus lockdown has effectively curtailed activity across the country no matter what sector or business you work in. 

Many are furloughing staff and closing their doors while others are scrambling to find new ways of remote working or home delivery to ensure  some actual business is being conducted. 

While there are several methods available to companies to get assistance, bills and rent will continue to fall due and require payment even if a business does not currently have an active income stream. If a business can’t or won’t pay them then it will find itself in trouble, pandemic or not.

Who can issue a winding up petition?

One of the most common forms of pursuing debt resolution is through the issuing of a winding-up petition. 

Most simply, this means that a creditor approaches the court and asks for permission to file the petition against the company that owes them money.  If various conditions are satisfied and the judge agrees then a petition can be issued. 

The most serious consequence of which is that if the debt isn’t paid off or the petition set aside, then the business will be forced to go into compulsory liquidation and its assets sold off to fulfil the debt. 

There are other potential negative side-effects from the issuing of a winding-up petition too. It could encourage other creditors to stop supplying or providing credit or funding to a business, increasing the strain it is under. It could also lead to the freezing of business bank accounts meaning that it is impossible to continue running the company normally. 

Some well-known retailers are using the coronavirus lockdown to bolster their own precarious positions through denying their landlords rent and refusing to pay suppliers for orders either already on the way to their warehouses or with stock already in situ that was ordered before the lockdown took effect. 

Each of them is risking its very existence and leaving themselves open to a winding-up petition being issued against them. This year alone has seen 52 WUP’s being issued against retailers, the latest being the Arcadia group which owns Topman, Topshop and New Look. 

What about petitions already underway?

Most entrepreneurs are gamblers by nature so they should recognise the difference between a risky and a safe bet but some are betting the future of their company on the hope that the legal system seizes up under the lockdown and that the temporary closure of local courts  meant that any new winding-up petitions couldn’t be processed for some weeks. 

When the lockdown was officially declared, Presiding ICC Judge Mullen ordered the mass adjournment of the winding-up list so that the Insolvency Court would remain in step with the rest of the public facing bodies. 

This meant that every case that was due to be heard prior to April 21 was adjourned. 

Then something incredible happened

The court, not known to usually move swiftly and effectively, embraced modern technology and remote working practices and started to hear private winding-up petitions via Skype. 

So despite the lockdown, the system is beginning to function normally again. 

Currently, the petitions being heard exclude those being brought by HMRC, the most frequent creditor, and a backlog remains from the previous adjournments so if any new case has to be adjourned for whatever reason, then it will go to the back of this existing queue. 

The current adjournment rescheduling delay is approx. 42 days but this could reduce quickly as more cases are being dealt with remotely and the courts begin to process through the lists quicker than expected. 

Chris Horner, Insolvency Director with BusinessRescueExpert, said: “Surprising though it might seem, if any business has a winding-up petition served against them then they may need to act even quicker to defend it than they would prior to the lockdown. 

“We don’t know for sure what permanent changes will come about in business and legal practice following the lockdown but if the system is working more efficiently remotely, then they might be more likely to adopt it.”

So in answer to the original questions – Will a winding-up petition go ahead now the courts are closed? – Yes, because they aren’t closed!

A clear and present danger

A winding-up petition is a clear and present danger to any business, especially at the moment. 

In usual circumstances there are several approaches you could take to suspend or solve the situation but understandably your options could be limited right now. 

However every crisis offers opportunities and placing a company into administration is an unorthodox but effective way of buying your business time to breath and restore its position. 

The company would be protected from creditors for a period and directors could retain ownership and retake command after a period when creditors can be negotiated with and a mutually beneficial way forward found. 

You can get in touch with us today to discuss what options you’ve got. The sooner the better. 

One of our team of expert advisors can arrange a free virtual initial consultation where we can get a full understanding of your situation and be able to work with you to plan a step-by-step plan to get your business through its current challenges and back to health.