Dealing with a winding up petition
A winding up petition is legal action taken by a creditor (or several creditors) in relation to a company that owes them money. Other parties can petition but it is most common for this action to be taken by creditors.
In accordance with current legislation, the debt threshold for presentation of a winding up petition is raised to £10,000 or more and petitioning creditors must seek repayment proposals from the debtor company, allowing 21 days for a response. These changes are in force until 31 March 2022.
As with any petition, the debt owed must be for a liquidated sum. It cannot be an ‘excluded debt’ i.e. a business tenancy debt that remains unpaid as a result of the Covid-19 pandemic.
What happens when a winding up petition is presented?
Once the petition is filed at Court it will be endorsed and the Court will set a hearing date, at which the petition will be heard. The petition must then be served at the registered office of the company, and it will also be advertised in The London Gazette.
If a winding up order is made at the hearing, the company will enter compulsory liquidation and the Official Receiver will be initially appointed as liquidator.
What can be done to stop a Winding up Petition?
If you have had a winding up petition filed against your company, the options available will depend on which stage in the compulsory liquidation process you are. Winding-up petitions are advertised in The Gazette because they are public notices. Once the petition has been advertised the consequences are usually worsened. If you are dealing with a petition that has been filed, but not yet advertised:
- Dispute the Petition Debt
If the debt is disputed you can notify the Court that this is the case. However, you can only take this course of action where there is a valid reason for dispute, and you have evidence in support of this.
- Pay the Petition Debt
It may not be possible, but if you can pay off the full amount owed to the creditor (and their costs of bringing the petition) you may be able to prevent the petition from being advertised and becoming public information.
A company in administration benefits from a moratorium which would prevent an order to wind up the company from being made. If a petition has been filed, you must apply to the court for the winding up petition to be adjourned before it can consider whether an administration order would be appropriate.
Once the petition has been advertised the above options remain open to the company, but it may be more difficult to continue trading as the company’s bank accounts are likely to be frozen.
What happens if a winding up order is made against my company?
If a winding-up order is made, then the petition process is complete, and the Official Receiver will be appointed as liquidator to the company. The company’s creditors and contributories may appoint an alternative insolvency practitioner to act as liquidator. A liquidator has the power to deal with the affairs of a company and their role is to review the company affairs, conduct investigations and to act in the best interests of the company generally.
The powers of any existing directors or managers of the company will cease, although you will have an obligation to co-operate with the liquidator and provide them with information about the company and its financial position.
Help from Insolvency Practitioners
If your company is under threat of winding up, or a petition has been served it is important to seek professional advice as soon as possible. Keywood Group is a firm of Licenced Insolvency Practitioners with offices in Birmingham and London, although we cover the whole of England and Wales. Our team has extensive experience dealing with businesses in distress and can help you to assess the company’s financial position, and what can be done.
Our Insolvency Practitioner is fully licenced and regulated by The Insolvency Practitioners Association. If you want further information, please contact us for a no obligation chat.