A winding up petition is a form of legal notice. Put to the court by a creditor, this notice communicates a creditor’s belief that a company is insolvent, and requests the liquidation of that company for the purposes of paying its debt to the creditor who has issued the notice.
If you have received a winding up petition, this indicates the most serious action that can be taken against your company. Usually, a creditor has done this following several failed payment requests and/or bounced cheques, and feels there is no other option to recover the money owed to them than to request the winding up of your company.
After receiving such a petition, you may think there are no options left for you to repay your debts or recover your business. However, there are things you can do if you act quickly.
You need to know that receiving a winding up petition does not necessarily mean the closure of your business is imminent; indeed, you could very likely be making every possible attempt to negotiate with your creditor, but simply were the victim of circumstances beyond your control, such as slow-paying customers or the loss of an important contract.
It may also be that you received the petition completely unexpectedly. This can occur when a creditor is making an attempt to expedite payment of their debt. If you suspect this is the case, it’s important to contact one of our insolvency practitioners as soon as possible, as we can advise you on how to best handle this situation.
How Much Time Do You Have?
Once you receive a winding up petition, you only have 7 days to take one of the following actions to save your company:
- Place your company into Administration;
- Pay your creditor, in full;
- Dispute the debt amount or the existence of the debt;
- Submit a proposal for a Company Voluntary Arrangement.
When there is so little time to act, it can become difficult to make the decision that is best for you. This is why we strongly recommend calling a licensed insolvency practitioner as soon as possible after having received a winding up petition.
Why You Cannot Wait
7 days is not long to take action. However, if you do not do so, your petition will be advertised in The London Gazette. Once your position has been made public, banks can freeze your accounts, preventing you from trading. As well, by waiting and not taking action before the petition hearing date, your situation can still be made public when heard at court, which can damage your reputation even further.
Doing nothing will also increase the chances of a Winding Up Order being issued by the court. Should this happen, your company will be placed into something called Compulsory Liquidation. This will require your company to cease trading, and will make all of your existing staff redundant.
The best time to take action is within the 7 days following receipt of the petition. It is advisable to not seek the official opinion of advisers introduced by lenders or banks; rather, seek the advice of an impartial professional. This will allow you to know and understand all of the options available.
Your business may still be turned around and be viable. The best way to confirm this is to contact a licensed insolvency practitioner as soon as possible after having received a winding up petition.