In business, there are few things as distressing as receiving a Winding Up Petition. At Chamberlain & Co we understand that a Winding Up Petition is one of the most severe legal actions a creditor can take against your company. Without taking swift action, it can have serious implications for your company that may result in the company ceasing to trade and ultimately the end of your company and the crystallising of any personal guarantees which you may have given in respect of the company’s various liabilities.
Receiving a Winding Up Petition is the most significant indication that a company director needs to contact a trustworthy insolvency advisor immediately. Once notice has been received, you may have as little as seven days before the company’s financial situation is made public by way of an advert. A date is then set by the court for a hearing to decide whether or not the company will be wound up and placed into Compulsory Liquidation.
What can you do?
Once the Winding Up Petition has been received, you must take action straight away for any chance at saving your business. Within 7 days, you must do one or all of the following if you wish to preserve your business:
- Pay off all monies owed to the petitioning creditor who has filed a petition for the Winding Up of your company, including the costs of the action. This could be HMRC or any other creditor owed in £750 or more.
- Seek an Administration Order to have the business placed into Administration. This would need either the cooperation of a secured creditor holding a Qualifying Floating Charge (QFC) or for the director to make a formal application to court. This would involve the preparation of a detailed witness statement. If a licensed insolvency practitioner is appointed Administrator he or she may take over the management of the company and will assess the company’s situation and determine the options available to maximise the return to creditors. This may include the sale of the business and assets to a third party or possibly a successor company. An Administration order will also impose a stay on any legal action meaning that the court will not issue a Winding Up Order at this time.
- Prepare documentation to present at court that proves without a doubt that the filing is invalid or that the debt is disputed. To be successful, you must have substantial evidence to prove that the claimed debt is inaccurate or fraudulent. This should only be attempted after seeking advice from an experienced insolvency practitioner or insolvency solicitor.
- Propose a Company Voluntary Arrangement (CVA). This is an agreement between the insolvent company and its creditors. The company proposes that it will make contributions to, or realise assets and pay the proceeds to, a Supervisor (Insolvency Practitioner) over a defined period of time. This allows the company to continue trading without the constant threat of creditor action being taken. Although creditors may not be paid in full a CVA may be more appealing to creditors as they should receive a higher repayment against their debts than if the company was wound up and placed into Compulsory Liquidation.
Regardless of the type of action to be taken it will be necessary for the company to have Counsel representation at the Winding Up hearing to ensure the situation and course of action proposed by the company is accurately presented to the Court. Chamberlain & Co can arrange for Counsel to attend court with or on behalf of the company and request any necessary adjournment whilst an alternative course of action is pursued.
Of the above procedures, a CVA is potentially the least invasive course of action to take as far as the company is concerned in this situation. However, it is worth remembering that a in order for a CVA to be approved creditors equalling or in excess of 75% in monetary value need to agree to the proposal put forward or agreed with modifications. The best course of action is to contact a licensed professional insolvency practitioner such as Chamberlain & Co who will determine if this is the best route and if so help to prepare your proposal and deliver it to the creditors.
Irrespective of which of the above options are appropriate the directors should seek the advice and guidance of Chamberlain & Co, as a licensed insolvency practitioner, to protect themselves by ensuring they are fully aware of their duties and seek guidance as early in the decision making process as possible. If the directors are seen to have taken professional advice, this may help when the Official Receiver is conducting his investigations in to the actions of the company’s directors and forming a view on their conduct.
Do you need help with a statutory demand or Winding Up Petition? Contact one of our licensed insolvency team for a fully confidential discussion about your business situation. Chamberlain & Co have offices in Leeds, London, Sheffield and York. Call us on 0113 868 1203 to schedule your consultation today.