How to deal with a Winding up Petition
In response to the COVID-19 pandemic the UK government suspended the issuing of winding up petitions and statutory demands with effect from 27 April 2020. This suspension was due to expire on 30 September 2020 but was extended a number of times and will now expire on 30 June 2021.
A winding-up petition is one of the most severe debt collection methods a creditor can use to try and recover what they are owed. It is important for business owners to understand what a winding-up petition is, what can be done if your company receives one, and what happens if the petition is successful and a winding up order is made.
What is a Winding up Petition?
A winding up petition is legal action taken by a creditor (or several creditors) in relation to a company that owes them £750, or more. It is usually a final resort. Other parties can petition but it is most common for this action to be taken by creditors.
Once the petition is filed at Court it will be endorsed and the Court will set a hearing date, at which the petition will be heard. The petition must then be served at the registered office of the company and it will also be advertised in The Gazette.
If a winding up order is made at the hearing, the company will enter compulsory liquidation and the Official Receiver will be initially appointed as liquidator.
What can be done to stop a Winding up Petition?
If you have had a winding up petition filed against your company, the options available will depend on which stage in the compulsory liquidation process you are. Winding-up petitions are advertised in The Gazette because they are public notices. Once the petition has been advertised the consequences are usually exacerbated.
Dealing with a Winding up Petition that has been filed but not yet advertised:
- Dispute the Petition Debt
If the debt is disputed you can notify the Court that this is the case. However, you can only take this course of action where there is a valid reason for dispute, and you have evidence in support of this.
- Pay the Petition Debt
It may not be possible, but if you can pay off the full amount owed to the creditor (and their costs of bringing the petition) you may be able to prevent the petition from being advertised and becoming public information.
A company in administration benefits from a moratorium, which prevents any legal proceedings being brought or continued against it. If a petition has been filed, you must apply to the court for the winding up petition to be adjourned before it can consider whether an administration order would be appropriate.
Dealing with a Winding up Petition that has been filed and advertised in The Gazette:
Once the petition has been advertised the above remain open to the company, but it may be more difficult to continue trading as the company’s bank accounts are likely to be frozen. It will also be necessary to apply for a Validation Order, authorising the disposal of company property (including cash) after a winding up petition has been filed.
If successful, this allows the company’s bank accounts to be used so that you can implement a proposed course of action. Without a Validation Order any disposal of company property would be void if a winding-up order is then made.
What happens if a winding up order is made against my company?
If a winding-up order is made, then the petition process is complete and the Official Receiver will be appointed as liquidator to the company. The company’s creditors and contributories may appoint an alternative insolvency practitioner to act as liquidator. A liquidator has the power to deal with the affairs of a company and their role is to review the company affairs, conduct investigations and to act in the best interests of the company generally.
The powers of any existing directors or managers of the company will cease, although you will have an obligation to co-operate with the liquidator and provide them with information about the company and its financial position.
Contact Insolvency Practitioners if you have received a petition
If you are concerned that your company is at risk from a winding up petition, once the current suspension is lifted you should seek urgent advice as soon as possible. The chances of saving your company from closure are greater the earlier you seek help.
Keystone Recovery is a Licenced Insolvency Practice and our team has extensive experience in dealing with company closures, or helping you to assess the alternative options available. If you want further information, please contact us for a no obligation chat.