The recent news that Patisserie Valerie are facing financial difficulties comes as yet another blow to the struggling British high street. In this article we discuss what happens when a winding up petition is issued against a business.
Last week it was reported that there had been some irregularities in the accounts of Patisserie Valerie and that rather than having £28m in reserves it was actually £9.8m in debt. The finance director has been suspended and arrested. There are allegations that the finance director had been cooking the books in that he had arranged secret overdrafts and overstated the company’s financial position.
However, over the weekend the chain has been given a lifeline of a £20m cash injection from Luke Johnson, the executive chairman of Patisserie Holdings. The cash may save the company from administration.
HMRC filed a winding up petition for £1.14m on 14 September 2018 with the court and served it on the company shortly thereafter. The petition was advertised on 5 October 2018 and the board only found out about the petition on 9 October 2018 when its bank accounts were frozen!
This case highlights some of the issues which are caused when a winding up petition is issued, namely that;
- Any dispositions of property eg payments from the company’s bank account etc are void unless sanctioned by the court;
- Once the petition is advertised, your bank accounts will be usually be frozen;
- The petition is a class action i.e. if you pay off the petitioning creditor another creditor can piggy back on to the petition and take it over. This can result in the company having to pay several creditors rather than the petitioning creditor;
- Your company is placed into liquidation!
When a company receives notice of a winding up petition, it is really important that the directors seek professional advice immediately as there may be other options open to the business. Patisserie Valerie is a really good case study of the damaging effects a winding up petition can have on a business.
For more information on bankruptcy, liquidation, administration and all the other insolvency procedures, or to take advantage of our free consultation, please telephone Stella Flemmings on 01377 257788, 01724 230060 or 01904 520116 and she will make you an appointment with one of our insolvency professionals at our Driffield, Scunthorpe or York offices. Our initial consultations are completely free and without obligation.