Restructuring and Insolvency

Winding Up Petitions

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What is a winding up petition?

A winding up petition is served on a company by a creditor, who is owed more than £750, who is seeking to place the company into compulsory liquidation.

The petitioning creditor will have previously made attempts to seek payment however their debt has remained unpaid.

The winding up petition will have been filed at Court and a date will have been set for the petition to be heard at a Court Hearing, where the judge will decide whether the company should be placed into Compulsory Liquidation.

Why have I received a winding up petition?

Unless HM Revenue & Customs (HMRC) is the petitioning creditor (see below), the petitioning creditor will have made previous attempts to enforce its debt and seek payment. This will either be through issuing a Statutory Demand, which has not been settled or dealt with within 21 days of it being served, or a creditor who has obtained a County Court Judgment (CCJ) and after seeking to enforce the CCJ, their debt remains unsettled.

Alternatively, if HMRC is the petitioning creditor, then they are able to issue a winding up petition without first issuing a statutory demand or obtaining a CCJ. However, before HMRC issue the winding up petition they will have usually sent numerous written correspondence to the company.

What are the consequence of Compulsory Liquidation?

  • Once the petition has been filed in Court, which will likely be some weeks before the Court hearing when the Winding Up Order is made to place the company into Compulsory Liquidation, all transactions out of the company’s bank account are void, unless the Court agrees otherwise
  • All asset disposals, including payments to directors and their associates, between the date of the winding up petition and the winding up order are void, unless the Court agrees otherwise
  • On the making of the winding up order, all employees immediately become redundant
  • On the making of the winding up order, all the directors’ powers cease and the Official Receiver becomes in charge of the company’s assets
  • All contracts are terminated
  • Due to the high costs associated, there is often little to no return to creditors involved
  • The conduct of directors will be subject to thorough scrutiny and any evidence of wrongdoing can be investigated and reported which could lead to prosecution
  • Winding up petitions must be advertised in the London Gazette and therefore become a matter of public knowledge, once a petition is advertised a company’s bank will usually take steps to immediately freeze the account

What can I do to avoid Compulsory Liquidation?

There are a number of steps that a company can take to try and avoid Compulsory Liquidation, such as:

  • Pay the debt - If a company is able to raise funds to repay the petitioning creditor then it may be possible to avoid the liquidation process 
  • Raise finance - In some situations it may be possible to raise finances against company assets in order to pay the petitioning creditor (and other debts). Our Funding Solutions team can help explore the different options available to you 
  • CVA - In some circumstances, a CVA (Company Voluntary Arrangement) can be proposed as an alternative to liquidation 
  • Hearing adjournment - it is often possible to seek an adjournment of a hearing in order to provide more time to consider the options available, we are able to arrange representation at Court on short notice, if required 

Need more help?

If your company has been served with a winding up petition, our experts can provide advice to help you understand your options. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

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