A very common reason for business owners to contact us is that they have been threatened with winding up by HM Revenue and Customs (HMRC). This is bound to cause sleepless nights about what to do next. The good news is – we can help.
HMRC regularly use the threat of a winding up petition to push for tax debts to be paid. Often it works and the debt is paid. However there are times when the business simply cannot afford to pay the tax and the question is – what will happen next?
If HMRC presents a winding up petition in the High Court in London, this will often mean that the company is unable to continue to trade. This is because there is a rule against a company spending money or dealing with its assets after the petition is presented. This is a common sense provision that is designed to stop unscrupulous directors from dissipating assets in the weeks and months immediately before a company goes into liquidation. There is the possibility of asking the court to validate payments, for example so key suppliers and employees are able to be paid. But the court will usually need to be certain that they payments are in the best interests of creditors as a whole: why pay a supplier or pay employees this week, if the company is going to go bust next week?
If a petition has not yet been presented, it is important to seek advice on the company’s options as soon a winding up petition is threatened. It may be that a payment plan can be put in place, or a formal repayment arrangement such as a Company Voluntary Arrangement (CVA) can be put forward to deal with all the company’s debts, allowing the company to get over a short term cash flow problem and continue to trade.
Even if a winding up petition has already been presented to the court, it is possible to place a company into ‘voluntary liquidation’ before a winding up order is made. This is usually quicker than a winding up through the courts and may allow for an orderly sale of the company’s assets before the financial problems become widely known.
If you are facing a winding up petition, or the threat of a winding up petition, call us today to find out your options. Call us today to arrange a free and confidential meeting to explore your options. We can help.