Stop a Winding Up Petition

There are various ways to stop a Winding Up Petition. It may not be to late to negotiate with the creditor. A rescue solution could be used to protect the company. Alternatively it may be possible to defend the Petition at Court.

Received a Winding Up Petition? Give us a call (0800 180 8440) or complete the form below to speak to one of our experts

Prevent a Winding Up Petition by paying the Debt

Before a creditor can apply for a Winding Up Petition they must first issue a Statutory Demand. The company then has 21 days to reach a payment agreement. If the directors have not previously engaged with the creditor they should do so now.

It is usually never too late to try and negotiate a sensible payment plan. Most creditors are simply interested in being paid the debt that they are owed. As such even at this let stage it is likely that they would prefer to accept a genuine payment proposal.

The cost of applying for a Winding Up Petition can be as much as £3000. In addition if the company is then closed the petitioning creditor is not paid preferentially. As such a threat of winding up is very often one that a creditor will be reluctant to see through.

It may not be possible to agree reasonable payment instalments with HMRC. Alternatively the creditor might be particularly hostile. If this is the case you must act quickly to prevent a Winding Up Petition being granted.

Protect against Winding Up with a Company Debt Solution

If the company cannot pay the debt owed or has multiple creditors then negotiating a sensible repayment plan can be hard. In these circumstances the directors should consider implementing a formal rescue solution.

For smaller companies the options are normally Company Voluntary Arrangement (CVA) or a Pre Pack solution. A CVA is a formal agreement with all of the company’s creditors to reduce payments and write debt off.

A Pre Pack involves setting up a new company which then buys the assets of the old. The new business can then trade debt free while the old is put into Liquidation.

A Pre Pack cannot be used after a Winding Up Petition has already been issued. This is because the trading of all company assets is suspended. No agreement can then be made for their sale until a Liquidator is appointed.

Argue your case at the Winding Up Hearing

If a Winding Up Petition is issued a date will be set for a Court Hearing. A Judge will listen to any arguments from both the creditor and company directors. They will then decide whether or not the company should be closed.

If the directors feel that the Petition has been issued unfairly or in error they will need to make their case at the hearing. You need to be prepared to have a good defence against the arguments that the creditor will put forward.

The creditor will argue that they have previously tried every means possible to recover their debt. They may also argue you are allowing your company to trade while insolvent. If you are unable to overcome these arguments it is likely that the Judge will issue a Winding Up Order. A Liquidator will then be appointed and the company forced to close.

Do you want your Company to be Closed?

If the directors have already decided that they want the company to be closed the receipt of a Winding Up Petition might be welcomed. In this scenario the advantage is that the directors avoid paying for the liquidation themselves.

It is important to remember that the Court appointed Liquidator must report on the Director’s conduct. If they consider that a director has not acted properly further investigation by the Insolvency Service will be recommended. In the worst cases this could lead to disqualification.

If you are currently a director of other companies or wish to be so in the future it is best to avoid Winding Up. If you close the company voluntarily you will be able to appoint the liquidator. This in itself is a sign that you are acting properly. As such the risk of further investigation is reduced.

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