- Company winding-up petitions are presented to the court when a creditor wants to wind up an insolvent company
- Evidence will be needed in a winding-up petition to prove the company cannot pay its debts
- If approved, a winding-up petition will instigate a Compulsory Liquidation, which is followed by a hearing to place the company into liquidation
What is a company winding-up petition?
A winding-up petition is presented to the court in order to obtain a winding-up order against an insolvent company.
In order for the petition to be successful it needs to prove that the company cannot pay its debts when due. For evidence that this is the case a Statutory Demand will be made for the amount owed by the creditor. The company will then have 21 days to pay the Statutory Demand or come to an arrangement with their creditor for the payment.
If neither of these steps are taken, then the Statutory Demand will be used as the evidence needed in the petition.
When are company winding-up petitions issued?
If you are trading an insolvent company and have received threat of legal action from your creditors due to lack of payment, you may need to understand the next steps that they could take. The most common legal action for an angry creditor to take against a company who owes them money is to issue a winding-up petition to the court to get the company wound up.
What happens if a company has been issued with a winding-up petition?
If a company has been issued with a winding-up petition and it is prior to their court hearing date, then they may still have a chance to either fight the petition or voluntarily place themselves into liquidation via a Creditors’ Voluntary Liquidation.
By voluntarily placing your company into a Creditors’ Voluntary Liquidation it will not only hold a more positive stigma on the director’s actions but it will also provide a more flexible liquidation process compared to the court-led Compulsory Liquidation process that the company will have to enter if the winding-up petition is granted.
This increased flexibility may allow for the sale of the company’s business and assets as part of the voluntary liquidation process which may allow the business to continue either within a new company or a sole trader.
The next steps following a winding-up petition
If you have been issued with a winding-up petition the first step would be to contact a Licensed Insolvency Practitioner who will discuss the available next steps with you.
Typically this next step would be to enter into a Voluntary Liquidation; Creditors’ Voluntary Liquidation to ensure that the liquidation of the company is kept out of court and proceeded with by a private sector Insolvency Practitioner.
Please Note: Don’t forget that at this stage there may still be time to keep the company running by offering a settlement to the petitioning creditor. This could include a formal arrangement for deferred payment through a Company Voluntary Arrangement CVA.
If the winding-up petition has already been advertised it will lead to the company’s bank account being frozen. This therefore means it is may be too late to enter a voluntary liquidation and your case will pass to the Official Receiver who is appointed by the court to act as liquidator on all Compulsory Liquidations.
Please Note: However even this late stage does not mean the end. A Company Voluntary Arrangement may be still possible and the court hearing may be adjourned (rescheduled to a later date) while the creditors consider a CVA proposal.
It is not impossible to look at a Voluntary Liquidation depending on the circumstance of the details circumstances of the company.
How can FA Simms & Partners help?
Depending on what stage we are approached by a company director will depend on what the options could be for the company.
If we are approached at an early stage when the creditors are just threatening the company with action, then we can help the company to try and come to a new arrangement with their creditors on a payment plan. We have a high success rate of helping companies re-negotiate their payments to HMRC.
In any circumstance we will also offer our best advice and explain all the options.
Please note: HMRC are the main creditors who will apply for a winding-up order against a company.
If you approach us once a winding-up petition has been issued then we can work quickly to help enter your company into a voluntary liquidation before the petition is processed and finalised or offer a Company Voluntary Arrangement if an informal arrangement cannot be reached.
As a private sector firm we try and help out all new enquiries to the best of our skills and knowledge. Therefore we urge companies who are being threatened with legal action to take action and receive professional help and advice as soon as possible.