If your company is struggling under the weight of escalating debts and creditors are relentlessly chasing you for payment that the company cannot afford, a Winding Up Petition is an inevitable outcome.
What is a Winding Up Petition?
A Winding Up Petition is a legal action brought by a creditor in an attempt to force your company into compulsory liquidation. If the petition is successful, your company will be wound up (liquidated) and its assets will be sold off to repay creditors.
Winding Up Petitions are usually filed by HMRC if your company has failed to pay taxes or VAT, but can also be filed by other creditors such as suppliers or landlords.
Winding Up Petition Process
Once a Winding Up Petition has been filed by HMRC, your company will be served with a notice of the petition. T.
If you do not take action, or if your company is unable to repay the debts owed, the court will grant the creditor’s request and your company will be wound up.
Stopping a Winding Up Petition
Unless steps are taken to quickly deal with the petition, the petitioning creditor – which in the majority of cases is HMRC – can put your company into compulsory liquidation. This will result in the company’s assets being sold off to pay creditors, and the directors losing control of the company.
To stop a Winding Up Petition, you need to act quickly and decisively. The first step is to contact the petitioning creditor and try to negotiate a payment plan. This is known as a “Time to Pay” arrangement. This involves negotiating with the creditor to agree on a reasonable payment plan to repay the debt over an extended period of time.
If you are unable to reach a Time to Pay arrangement with the creditor, you can also apply to have the petition adjourned. This will give you more time to find the money to pay off the debt or to negotiate a different repayment plan.
However, it is important to note that an adjournment is not a guarantee that the petition will be stopped – if you cannot prove to the court that you are able to repay the debt, the Winding Up Petition may still go ahead.
If you are facing a Winding Up Petition, it is important to seek professional help as soon as possible. An experienced insolvency practitioner can help you to understand your options and take the necessary steps to protect your company.The sooner you act, the greater your chances of success.
It is important to note that once a winding up petition has been issued, any dispositions of property such as payments from your bank account are void unless they have been sanctioned by the court.
Here are some steps you can take to try and stop a Winding Up Petition:
1) Negotiate with the Petitioning Creditor
The first step is to try and negotiate a payment plan with the petitioning creditor. If you can come to an agreement, you may be able to have the petition withdrawn.
2) Apply for Time to Pay
If you cannot reach an agreement with the petitioning creditor, you can apply for Time to Pay from HMRC. This will give you more time to repay your debts.
3) Use a Company Voluntary Arrangement
If you cannot reach an agreement with the petitioning creditor and your application for Time to Pay is unsuccessful, you can enter into a Company Voluntary Arrangement (CVA). This is a formal agreement between your company and its creditors to repay debts over a period of time.
4) Liquidate Your Company Voluntarily
If you cannot reach an agreement with the petitioning creditor and your application for Time to Pay is unsuccessful, you can choose to voluntarily liquidate your company. This means that your company will be wound up and its assets sold off to repay creditors.
5) Fight the Petition in Court
If you believe that the Winding Up Petition is unjustified, you can choose to fight it in court. This is a risky option as it can be expensive and there is no guarantee of success.
Taking action quickly is essential if you want to try and stop a Winding Up Petition. The sooner you take action, the greater your chances of success.
If you are struggling to deal with a Winding Up Petition, we can help. We have experienced insolvency practitioners and can advise you on the best course of action to take. Contact us today for a free consultation.