If a winding up petition has been presented against your company, often directors think that liquidation is inevitable. This does not have to be the case as there may be alternative solutions.
When a winding up petition is issued seek advice
The most important thing to remember is that you must act immediately and seek professional advice. Once the petition has been served, it may be advertised within 7 days. Once it has been advertised, the company’s bank account will be frozen and therefore you will not be able to access the funds. If a petition is advertised it does limit the options available. It also means that it is possible for other creditors to support the petition so instead of only having to deal with the petitioning creditor, you will have to deal with other creditors and therefore your options are limited again. If the company’s bank account is frozen then it will almost be impossible for the company to continue to trade as it will not be able to make any payments.
The process of a winding up petition
The winding up petition will state that a Court hearing has been set. If the debt is not disputed and the company is unable to settle the debt or negotiate a repayment plan, then the judge will make a winding up order at the hearing. If a winding up order is made, the Official Receiver will in the first instance be appointed as liquidator. The directors of the company will be responsible for providing the Official Receiver with full details of the company’s assets and liabilities.
A meeting will be arranged for the directors (or one director) to meet with the Official Receiver to discuss the reasons for the company’s failure and to discuss the assets and liabilities of the company. The Official Receiver will also review any transactions that took place from the date of the issuing of the winding up petition to the date of the winding up order to see whether there has been any dissipation of assets.
What options are available if the company is viable but suffering from cash flow problems?
- An emergency short term business loan could be the answer. The funds could be used to discharge the petition debt which would allow you the time to get the business back on track.
- If a trade supplier has issued the petition, it may to possible to negotiate a repayment plan or alternatively the supplier may be prepared to compromise the debt. If the company is placed into liquidation, it is likely that the supplier would only receive a small percentage of their debt but by reaching a compromise, both parties win as the company survives and the supplier receives a better return than they would receive in liquidation.
- If HM Revenue & Customs has issued the petition, it may be possible to enter into a ‘time to pay arrangement’ which could allow the company up to 12 months to repay the VAT, PAYE or corporation tax arrears. It is important to try to tackle the possibility of becoming insolvent before HMRC hits.
- If the company has significant debts to suppliers and HM Revenue & Customs and it needs more than 12 months to repay its liabilities, then the company could propose a Company Voluntary Arrangement (CVA). This would allow the company to come to a formal agreement with the petitioning creditors and all other creditors whereby the debts are repaid in full or in part over a period of up to 5 years.
- If you are struggling with customers who are late in paying, then you should consider taking advice from a commercial debt recovery firm. By using intelligent debt collection, it is possible that the debts can be collected quickly and efficiently. Your hands do not need to be tied by the failure of your customers to pay on time.
At Cashsolv, we offer solutions to company directors who have been presented with a winding up petition. Listed above are a few of the services that we offer.