Winding-Up Petitions – the costs of doing nothing

WindingupPetition2 what do I need to doThe following story is a tale of how failing to pay moneys owed can end up not only with costs escalating but can also lead to the risk of a business being closed down as a result of a Winding-Up Petition.

A client was disputing a debt of up to £70,000 in relation to legal costs accrued by their lawyer, because unfortunately the lawyer had not achieved the result the client expected.

After protracted negotiations the lawyers agreed to accept a settlement of £5,000.

However, the client failed to pay because another director of the company refused to pay even this amount.

The lawyer then took the company to court and obtained default judgement for £15,000.

Another 12 months passed, and still the debt was not paid so finally the lawyer issued a Winding-Up Petition in respect of the £15,000 judgement plus interest and costs.

The client had no option but to pay up to avoid their company being closed down. It cost £20,000 excluding our modest fees.

Plainly this whole sorry situation could have been avoided and been considerably less costly had the client paid the £5,000 that had been agreed albeit with only one director.  Instead, doing nothing resulted in having to pay more than four times that amount and to face a cliff-hanger situation regarding its future.

This is a perfect example of how doing nothing can so exasperate creditors to the point where they lose patience altogether.  Do you have any similar examples or anecdotes to share?

For a collection of free articles on Winding-Up petitions and associated issues why not download the “Turnaround” App from your Appstore or visit the Knowledge Bank at K2 Partners.

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