I have a Winding Up Petition - What should I do?

What is a winding up petition ?

If your company has debt and receives a Winding up Petition, this could have very serious consequences for both you and your business. It is therefore very important to understand what a Winding up Petition is, the implications of receiving one and how to prevent the action.

A winding up petition is an application to the court by one of a company's creditors to force it to close.

Any creditor who is owed more than £750 can apply for a winding up petition. They first have to issue a statutory demand for payment of the debt. If this is ignored or a satisfactory payment plan cannot be agreed within 21 days, the creditor then has the right to apply for a winding up petition.

The application is made at the High Court. If the petition is granted, it will be advertised in the London Gazette.

Call us now for further help and support

What are the effects of a winding up petition?

Once a winding up petition is issued by the court, the company closure process is deemed to have begun. As such, the effects are potentially devastating for the business.

• Bank accounts frozen
• Trading suspended

The company's bank will normally suspend all transactions from any of its accounts. This is to ensure that the bank cannot be held liable for any transactions undertaken if the company is later closed.

Trading will also effectively be suspended because the no company assets can be sold or shares transferred without the prior agreement of the court.

If the company wants to sell any goods or even pay staff to ensure the completion of work in progress, this must be expressly agreed by the court in the form of a validation order.

Call us now for further help and support

What happens if a winding up order is issued?

A hearing will be held at the High Court shortly after the winding up petition has been issued. At the hearing, the directors of the business may choose to challenge the action and have the petition stopped.

However, if the court believes that the company is insolvent and unable to continue to trade, it will issue a winding up petition.

The court will then immediately appoint a liquidator to close the business

• Company assets sold
• Employees made redundant
• Directors investigated

The Liquidator will review all of the company’s assets and try to sell them to repay the company’s creditors. In general there will not be enough funds to pay the creditors what they are owed in full.

The company’s employees will be made redundant. Redundancy payments will be made up to a level of £800. If employees are owed more than this, the outstanding amounts will be treated in the same way as any unsecured creditors.

The liquidator will undertake an investigation into the conduct of the directors to see whether they have knowingly allowed the business to trade while insolvent thus making the creditor’s position worse. If this is the case, a director may face being disqualified and held personally liable for the company’s debts.

If your company has been threatened with winding up, call us NOW