Can I prevent a creditor winding-up my company?
If your business is subject to a winding up petition as a result of creditor action, your company runs the risk of compulsory liquidation, unless you have a genuine reason to contest this. If you have grounds to challenge the winding up petition, you have a limited time frame in which you should act to prevent the action from being publicised and being instructed to attend court.
If you have the means to repay creditors, this should be your first course of action to prevent the situation from escalating. If you have entered a formal insolvency procedure, you should be protected from legal action against creditors and therefore unaffected by the winding up petition.
Repay debt or enter into a formal payment agreement
If you repay the debt within seven days, the winding up petition against your company must be withdrawn. If you delay the withdrawal of the petition, the winding up petition will be advertised in the London Gazette and you may still be required to attend the court hearing and show formal evidence showing that the debt has been settled. Alternatively, if you enter into a formal payment agreement with the creditor, withdrawal rules apply.
Adjourn winding up petition
If you are in the process of gathering the funds to repay creditors from the likes of an investment return, pending sale or cash injection, a reasonable adjournment can be requested until the payment is received.
Creditors’ Voluntary Liquidation
If you are in the process of a Creditors’ Voluntary Liquidation (CVL), you will be protected from legal action against creditors, such as a winding up petition. Voluntary liquidation can help you settle the score with creditors by realising assets and distributing the value to repay outstanding debts. This route is typically taken as a result of debt build-up, leading to the inevitable closure of the business voluntarily.
Company Voluntary Arrangement
A Company Voluntary Arrangement (CVA) is a formal insolvency measure which can be used to restructure liabilities into affordable instalments, payable over several years. Entering into a CVA protects the business from legal action from creditors, therefore nullifying the winding up petition. A proposal to enter into a CVA drastically improves the chances of generating returns for creditors if the business is realistically able to maintain payments.
Company Administration
If your business is insolvent but wishes to avoid the prospect of liquidation, company administration is a formal procedure which can help bring about a recovery. If the business is asset rich, yet cash poor, this route can protect the business from compulsory liquidation and the associated legal action, such as a winding up petition.
Dispute winding up petition
If the debt in question is in dispute, a winding up petition cannot be used by the creditor to apply pressure, forcing the business into submission. If you disagree with the petition, you can apply to the courts for an injunction and prevent it from being advertised in the Gazette.
There are typical warning signs which show that creditor action is impending, such as a statutory demand for payment which is a formal request from the creditor to make repayment. This sets out a 21-day period in which payment should be made, negotiations should commence, or a formal insolvency procedure should be pursued. A County Court Judgment is one step up and a serious concern as failure to comply could result in adversely affecting the company credit record, hindering your chances of accessing finance.
A winding up petition is a serious threat which can quickly lead to the forced closure of your business, so you must seek advice in the first instance to protect your business. Speak to your accountant for tailored advice as each situation is unique, contact Handpicked Accountants to help find a qualified accountant in your area.
