*Please note that the Corporate Insolvency and Governance bill has introduced a moratorium preventing the use of statutory demands and winding up petitions where the reason for the unpaid liability is as a result of COVID-19. These restrictions are due to lift on 1 October 2021.
What is a winding up petition?
If you receive a winding up petition it means that you have not paid a debt that has fallen due. A winding up petition is a formal document issued by a creditor of the company, approved by the court, stating that there will be a court hearing to decide if your company should be wound up as it is insolvent.
What should I do if I have received a winding-up petition?
If you receive a winding up petition, you should not ignore it. After receiving the petition, the next stage will be a court hearing which could result in your company being wound up and placed into compulsory liquidation. Directors should be aware that along with the winding up petition, the creditor could have advertised the petition in the London Gazette as early as seven days from service of the petition on you. Such an advertisement may result in your bank accounts being frozen unless you have a ‘validation order’ authorising transactions.
Firstly, you should seek legal advice from an insolvency solicitor. You should consider whether you can afford to pay the debt, whether the company is actually insolvent and the options available to you. These are all matters that should be discussed with a professional who will advise you on the options available to you and the possible consequences of certain actions.
What can I do if I cannot pay the debt?
There are several options available to you upon receiving a winding-up petition, including:
Asking the petitioning creditor for a payment plan to pay off the debt and ask them to withdraw the petition;
Asking the court for an adjournment of the first hearing to allow you more time to find the funds to pay the debt;
Talking to a solicitor about your options regarding administration, a company voluntary arrangement or a creditors voluntary liquidation. A solicitor may refer you to an Insolvency Practitioner following this discussion;
Instructing a solicitor to defend the winding-up petition on the basis that the company is not insolvent
You should always seek legal advice as early as possible if your company cannot pay its debts as they fall due. If you require advice on your company’s position please get in touch with Farleys’ corporate insolvency team on 0845 287 0939 or contact us by email.