If your business has become the subject of a winding up petition due to a creditors action, this puts your company at risk of being put into a compulsory liquidation, except if you have a legitimate reason to contest this liquidation. Should you have a reason to oppose this winding up petition there is a limited amount time in which you are able to prevent this action from being made public and being ordered to attend court.

If you are in a position where you are able to repay your creditors, this is the first path of action to consider as this will avoid the situation escalating. If a formal insolvency situation has already begun, the company is protected from any further legal action from creditors and will be unaffected by a winding up petition.

Repay debt or enter into a formal payment agreement

If you pay the debt within 7 days of the petition, the winding up petition must be withdrawn, however if you delay withdrawing the petition, the winding up is then advertised in the London Gazette and you will potentially still be obliged to attend a court hearing and present evidence that the debt has now been repaid. Withdrawal rules will apply if you enter a formal payment agreement with the creditor

Adjourn winding up petition

If you are in the process of collecting the funds required to pay the creditors from the likes of an pending sale, cash injection or investment return – in these circumstances, you can request a reasonable adjournment until this payment has been received.

Creditors’ Voluntary Liquidation

If a Creditors’ Voluntary Liquidation (CVL) process has begun then you are protected from creditors legal action, the same as with a winding up petition. A voluntary liquidation can help settle debts with creditors by realising the company assets and distributing the assets value in order to repay any outstanding debts. This is often the route taken when debts have built up and the and the business inevitably closes on a voluntary basis.

Company Voluntary Arrangement

Another option is a Company Voluntary Liquidation (CVA), this is a formal insolvency procedure that can be used to restructure a company’s liabilities into more affordable instalments that are payable over several years. Beginning the CVA process provides the business with protection from creditors legal action and nullifies a winding up petition. A proposal to enter a CVA can dramatically improve the chances of generating a return for creditors, if the business is able to maintain the payments.

Company Administration

If a business is insolvent but wishes to prevent liquidation, placing the company into administration is another suitable option. This is a formal procedure that can help a company recover, if a business has poor cash flow but is rich in assets this is an option that can help the business avoid a compulsory liquidation and other actions such as a winding up petition.

Dispute winding up petition

If the debt in question is in dispute, a winding up petition cannot be used by the creditor to apply pressure, forcing the business into submission. If you disagree with the petition, you can apply to the courts for an injunction and prevent it from being advertised in the Gazette.

If the debt is in dispute, then a creditor cannot use a Winding Up Petition to put pressure on the business and push them into paying. If you do not agree with the petition then you are able to apply to the court for an injunction that will stop this from being advertised in the Gazette.

There are often warning signs that can suggest a creditor is considering taking action, these can include a statutory demand for payment, this is a formal request from the creditor for you to make a payment. This allows 21 days for the payment to be made, you should begin to negotiate, or formal insolvency procedure ought to be pursued. The next step is County Court Judgement, this is a major concern as a failure to comply can damage the companies credit score and affect the companies future finance options.

A winding up petition is a serious threat which can quickly lead to the forced closure of your business, so you must seek advice in the first instance to protect your business. Speak to your accountant for tailored advice as each situation is unique, contact Handpicked Accountants to help find a qualified accountant in your area.

A Winding Up Petition is a very serious threat and they can quickly force businesses to close, the best thing to do is to seek advice as soon as possible to protect your business. For advice, speak to your accountant or contact Lucas Johnson Limited for free advice 0330 900 2000.