What to do if faced with a Winding Up Petition

Winding up petitions are usually used by creditors as a way of enforcing a debt that is owed to them, either by a company or a partnership. A petition may be presented by a single creditor, or by a group of creditors acting together. Either way, a winding up petition means that someone is owed some money and has decided to threaten that the business is forced into liquidation if the debt isn’t paid.

If a winding up petition is received, the first step is to carefully examine the debt that is being pursued under the petition. Is the money actually owed? Has the debt arisen out of a misunderstanding? Is it part of a genuine dispute? If so, it may be possible to challenge the petition in court. A court will not usually make a winding up order if the debt is genuinely disputed, so if there are valid reasons that the debt is not actually payable, these should be raised at the hearing. If there are valid reasons to dispute the debt, it may be wise to be represented at the hearing by a lawyer who can carefully argue your case. You can appear in court yourself and argue your own case, but the court is a busy place where time is often against you, so it is often an advantage to have someone who is experienced in litigation on your side.

It is important to remember that a winding up order can be made by the court if there is an undisputed debt of more than £750. So even though a much larger amount may be in dispute, as long as £750 or more is clearly payable, the court may make a winding up order. Therefore, minor discrepancies in the amount of debt being demanded is not enough to avoid a winding up order being made.

So what if the debt is due to be paid, not in dispute, but the company simply cannot afford the debt?

There are several options available to the company, depending on the exact circumstances. It may be possible to put forward an arrangement to pay all the company’s debts in instalments and, in some cases, it may also be possible to write off some of the company’s debts. This procedure is known as a Company Voluntary Arrangement or CVA. For more information on how a CVA could help avoid a winding up order, see here.

If a CVA is not appropriate, it may be possible to put the company into administration in order to rescue some, or all, of the business as a going concern.

Alternatively, a ‘voluntary liquidation’ may be possible, where the company enters into liquidation ‘voluntarily’ by appointing its own liquidator.

All of these options depend on the exact circumstances of the case. For expert advice on which option may be best for your company, call us today on 01709 331300 for a free, impartial and no-obligation consultation.