Winding Up Petitions
A creditor serves a company a winding up petition, usually as a last resort, with the intention of forcing the business into closure. It is presented in court in front of a judge.
A winding up petition often follows a period of cash flow problems that has affected creditor repayments and is the most serious action a creditor can take against a business. Once this petition has been served, you will have a matter of days to rescue the business before other creditors sign the petition and the bank freezes the company bank accounts.
From the date of the petition, you will have seven days to begin to pay the debts or respond with a defence. In the case where neither is possible, it is likely the Court will approve the petition and grant a winding up order. At this stage, the liquidation process will begin and you will no longer be able to oppose the process.
What can you do within the seven-day countdown?
Once the petition has been put in place you will have seven days to respond. Your options include:
- Proposing a Company Voluntary Arrangement (CVA), which offers a repayment plan to creditors over a defined period to prevent the liquidation of a viable business.
- Applying for an adjournment of proceedings so the company can consider Administration.
- Voluntarily placing the company into Administration to prevent a winding up order being issued.
- Repay all money due to the creditor(s), including the petitioner’s costs, using funding such as asset-financing.
- If you have evidence that the debt is not as great as the creditor has claimed, you could dispute the debt via the courts.
Once the winding up petition has been issued, it would be advisable to ensure all company records are made available. This will ensure you are in a position to move quickly should you find a method of avoiding liquidation.
Talk to an adviser in confidence