When a company is on the receiving end of a Winding-Up Petition, it is a sign that a creditor has run out of patience in trying to recover money they believe is owed to them.
The creditor will have weighed up the cost of applying to the courts for a Winding Up Petition which generally involves an investment of ~£3,000 covering £280 in court fees plus £1,350 as a petition deposit (to manage the ‘winding-up’) and the balance in legal fees, so it is a serious step for a creditor to take.
A Petition usually means that the two parties have failed deal with each other satisfactorily whether to take steps to resolve the debt or to be pro-active about dealing with the fact that it can’t be paid.
Winding-Up a company is a formal legal procedure whereby the creditor must be able to prove that the debtor company owes more than £750 as an undisputed debt, it must allow seven days from lodging the application before publishing a formal notice in the London Gazette, also a legal requirement.
However, once the notice is published all the business’ creditors will be aware that there is a problem and since banks are among those that monitor the London Gazette the situation will escalate rapidly since the usual first step for the banks is to freeze the business account.
This makes it harder for a business to carry on trading and in particular to make payments which in turn escalates the problem.
While there are steps a business can take to challenge a Winding-Up Petition, such as disputing the debt, and to restore access to its bank account, such as by applying for a Validation Order, there needs to be documented evidence to show the court.
Ideally, a business should be proactive and deal with the situation early by starting the process of saving the business long before a Petition is served.
Even when a company cannot pay, and when there is a Petition, providing the company is viable it can often be saved.
Saving a business and in particular when there is a Winding-Up Petition needs the impartial advice and the guidance of an expert, whether they are a turnaround advisor or an insolvency practitioner.
However, if things have reached the point where the Petition has been listed for hearing in court, a company can only be represented by a solicitor, barrister or a company director and one of these must attend the hearing to present evidence of steps taken to deal with the situation for there to be any hope of avoiding the court making an Order that the company be compulsorily closed (wound up).
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