The short answer is Yes but it is important to understand the limitations of this action. It may help to better understand what exactly a Winding Up Petition is and how the situation developed to the stage where the company was served with one.
The Stages Of A Winding Up Process
Any creditor to whom a company owes at least £750 may apply to have the company wound up. As this is quite a costly option, most ordinary trade creditors engage this option only as a last resort. Also, they generally only consider it when they feel that they have a reasonable probability of being paid at least some of the money owed to them from the proceeds of liquidating the company.
A Winding Up Order does not come out of the blue. It is usually preceded by a Statutory Demand for payment. Any creditor may issue a Statutory Demand. There is no cost other than a postage stamp and it does not require the involvement of a court to issue and serve it. The value to the claimant is that a company cannot ignore it, or request to have it set aside. A Statutory Demand must be responded to, stating the agreed mechanism by which the creditor’s demand will be satisfied. That could be by making payment, agreeing a repayment schedule, voluntarily winding up the company or placing the company into administration.
Proceeding To A Winding Up Petition
Very often, the action by the creditor stops at that point. One reason is that a Winding Up Petition must be accompanied by court fees and a deposit against the cost of eventual liquidation should the court grant a Winding Up Order. The current costs are something approaching £2,000 to lodge a Winding Up Petition, which is an indicator of the resolve of the claimant to proceed to court.
Once the petition has been advertised in the London Gazette, it must then proceed to a court hearing without exception, even if the company pays the claimant in the meantime. If the company has the foresight to engage an insolvency practitioner early in the process, the optimum time to fight a Winding Up Order is before it is so advertised. The reason being that the appearance of the advertisement alerts the banks, who may well freeze all the company’s accounts because any payments made after that point may be declared invalid and need to be recovered. Also, other creditors may join the petition, and all of them would need to be satisfied to prevent the court from awarding a Winding Up Order to the claimant.
How A Winding Up Petition Can Be Withdrawn
Only the claimant can request the court to withdraw a petition that has been advertised. The most frequent reason given for withdrawing a petition is if the claimant now believes that there is little chance of recovering money from the liquidation. Also, the costs of liquidation may outweigh and monies that might be recovered through the sale of assets and recouping monies owed to the company.
If the company has not paid the debt under the threat of being wound up, then the claimant may feel that it is simply not worth continuing with the action.
Find Out More
As licensed insolvency practitioners, we at BCR are perfectly placed to offer expert advice on all aspects of winding up actions and the options available to companies that are under threat. For more information, please download our free Guide To Business recovery & Turnaround.