What is a Winding Up Petition?
The term “winding up petition” ordinarily refers to an application made to a court to put a company into liquidation, although companies can be wound up voluntarily without the need for court intervention.
A winding up petition is a legal document that is submitted by the party or parties wishing to liquidate the company. These parties may be the directors of the company themselves, or may be a third party such as a creditor.
Why issue a Winding Up Petition?
It is not acceptable for a third party to attempt to wind up a company at an early stage in the debt collection process, nor is it necessarily in the creditor’s interests to do so. However, if all other attempts to obtain payment of money owed have failed, a creditor may issue a winding up petition as a last resort.
What happens when a Winding Up Petition is issued?
The first instance when you are likely to know that a winding up petition has been issued is when it is served upon your registered office or last known principal place of business address. If you have not already sought the advice of a licensed insolvency practitioner, you must do so now. Carrying on trading and conducting your affairs in a normal manner from this point forward can be problematic both on a practical level and when it comes to personal liability.
If a winding up petition is issued against your company, a court hearing will already have been arranged. In time (as early as 7 business days after you receive it) the winding up petition will be advertised for everyone to see, which means your bank will freeze your bank account and your business could die instantly. If this happens there are still actions that we can take, but time is paramount and you should contact us immediately.
Winding up a company in this way is also referred to as Compulsory Liquidation.
If the winding up order is made at the hearing, a Liquidator will be appointed to wind up your company’s affairs. Any employees will be automatically and immediately dismissed, HMRC and trade creditors will be paid from the available funds, and at the end of the process, your company will be dissolved and will no longer exist.
What to do if a Winding Up Petition is issued
First and foremost, if a winding up petition is issued against you, it is imperative that you seek advice from us immediately. Contact Nigel or Kevin at Lucas Johnson, who can advise the appropriate course of action.
Stopping a Winding Up Petition
It is possible to stop a winding up petition, but only if you act quickly and decisively. Seek advice from us immediately, the more time we have to propose an alternative to the compulsory liquidation of your company, the more successful we will be in protecting your business interests. Despite this though, Lucas Johnson can still help right up to the day of the hearing. If there is an alternative solution, such as a Company voluntary arrangement or Pre-pack Administration, we can make a proposal to the court that this is the best outcome and allow your company to continue trading and clear some or all of its debts.
Contact us now for help to stop a winding up petition.