Company Winding up Petitions - What you need to know - the basics

Company Winding up Petitions - What you need to know

A winding up petition is a form of legal action taken by a creditor to forcibly close a company due to unpaid debts.

If the petition to liquidate a company is successful, a winding up order will be granted by the Court and the compulsory liquidation process will commence.

What is the process for winding up a company?

• When a creditor hasn’t received payment after a number of unsuccessful attempts to recover it, they issue a statutory demand. Alternatively, they may have already obtained a County Court Judgment (or CCJ) against your company
• If you don’t repay the debt or agree on terms, a solicitor will apply to wind up your business
• A winding up petition is sent to court and served on your company
• A court date is set
• 7 days after the petition is served, it is advertised in the London Gazette. This is when your bank accounts will be frozen by your bank!
• If matters aren’t resolved, your company will be wound up by the court and you will lose control
• A liquidator is appointed who conducts a thorough investigation into the conduct of the directors.
So, what are your options when you are being threatened with or have received a winding-up petition?
• You can pay the debt, or
• Seek immediate support from a licensed insolvency practitioner
• An IP can assist with a formal or informal negotiation with your creditor.
• If your business is viable, it might be possible to negotiate a formal repayment plan with creditors through a Company Voluntary Arrangement (or CVA). Or you could enter into an Administration.
• A pre-pack liquidation involving a business asset sale to “newco” could be an option.
• You can consider applying for an adjournment of the petition hearing if more time is needed to consider options or to raise finance.

Whatever you do, don’t take the threat of a winding-up petition lightly. Remember, you need to act quickly as you only have 7 days to take action after service of the petition.

I hope this has been helpful.