What are the options following a winding up petition?
It is the moment that directors dread, a knock on the door and a winding up petition being handed over. Does this have to mean the end of the company or are there still options available? We often see directors who are at this stage, and whilst we would prefer to see them before when there are more options available, we can still help.
So what are the options if a director finds themselves in this situation? This depends on the petition and the debt.
Scenario 1 - The debt should have been paid already
In the unlikely situation that the winding up petition has been received purely due to an oversight on payment this is the simplest to resolve. By contacting the creditor an agreement can be reached whereby upon payment of the debt, together with any costs, the creditor will seek for the petition to be dismissed. Provided that this is done straight away the petition will not be advertised and therefore may not be brought to the attention of other creditors. It could however remain on the company’s credit record and therefore could affect credit so the key is to not get to this point. Steps would need to be put in place with credit control to ensure that no such error occurs again.
Scenario 2 - The debt is disputed
If there is a genuine dispute then this needs to be brought to the attention of both the court and the creditor. It is best to open up communication with the creditor particularly if they are unaware of the dispute. Explaining why there is a dispute to try to reach a resolution. If the matter is being discussed, and the creditor agrees, it is likely that the court will adjourn the petition for a short period of time whilst the dispute is resolved.
If the dispute has reached such a level that corresponding is no longer possible, then the matter can be brought to the attention of the court. The dispute can be set out, together with details of how the undisputed element (if any) of the debt will be settled. The court will consider both sides and either set the petition aside (i.e. strike it out) or adjourn the hearing whilst the matter is properly dealt with. A winding up order could be made if it is considered that the dispute is not genuine and no firm proposal for payment has been made.
In this case communication at an early stage with the creditor is key to try to get the matter resolved and legal representation will be important.
Scenario 3 - The debt is not disputed but time is needed to pay it
Again communication is important here. Contacting the creditor at an early stage is important before the petition is advertised to try to reach an agreement for the debt to be paid over time. If the creditor is in agreement with this then they can request that the petition be dismissed provided that agreed payments are made.
If the creditor is not in agreement with the payment plan and no agreement can be reached then a request will need to be made to the court to adjourn the hearing for the petition whilst the payments are agreed. If it is not possible and no other resolution can be made then again it will be for the judge to consider whether the payment plan is reasonable or whether the petition should be made. The key will be to show that the payment plan is both sensible and sustainable again with legal representation.
Scenario 4 - The company cannot pay and delaying winding up is not in the interest of the creditors
If the petition has been received because the company simply cannot pay the debt and it is insolvent, then it may be that allowing the winding up order to be made is appropriate. In some cases it may be that administration or voluntary liquidation is more appropriate.
Steps can be taken to place the company into administration or voluntary liquidation if it is time critical or if there will be a benefit from a voluntary process. This is particularly key where there is an underlying business that could be saved. With a potential delay of up to 12 weeks before a petition is heard any goodwill is likely to disappear. A prompt insolvency appointment may assist to enable a sale of the business or a sale of assets that are at risk from being dissipated.
The final option – do nothing
There is always the option to do nothing and simply let the company be wound up, before allowing this to happen it is worthwhile getting advice in case there are other options available which would result in a better outcome for all stakeholders.
To conclude
If you, or your client, finds themselves in this situation, irrespective of how late it has been left, get in touch with our team as we will do whatever we are able to in order to help.
If you have any concerns that this situation could be on the horizon, it is always best to reach out to a professional advisor sooner rather than later, as there will be options to understand the best way forward. Contact us on 0330 0243 999 or www.leonardcurtis.co.uk/contact.
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