Discovering that a Winding Up Petition has been issued against your company is a situation that all will wish to avoid. A Winding Up Petition is a document that can be filed by a creditor when you fail to pay your debts and, if approved by the court, will trigger the commencement of the winding up of the company via compulsory liquidation. Being issued a Winding Up Petition can therefore have disastrous consequences for the business and its directors, leading many to ask the question: ‘Can a Winding Up Petition be withdrawn?’.
The answer to the question is yes, though creditors will typically only issue a Winding Up Petition if they believe all other options for recovering the money owed have been exhausted. Therefore, you will have to work quickly and efficiently to defend a Winding Up Petition should you believe you have grounds for it to be withdrawn.
Defending A Winding Up Petition: Your Options
While there is no guarantee that you will be successful in any attempt to defend a Winding Up Petition, companies should be reassured that there are a number of different options available should you find yourself in these troublesome waters.
Pay Creditors Straight Away
The most straightforward way to get a Winding Up Petition withdrawn is to immediately repay the creditors in full. Do note that you will also be expected to cover the creditor’s costs for this to be a satisfactory resolution as issuing a Winding Up Petition is expensive.
Dispute The Winding Up Petition
If you believe that the Winding Up Petition has been unfairly or incorrectly issued, you can formally dispute it. For this to be a suitable defence, you will need to inform the courts and present evidence that the size of the debt is incorrect (or that the debt does not exist at all).
Agree A Payment Plan With Creditors
If the funds to pay creditors are not immediately available but you believe that you will be able to pay if given more time, you may be able to agree on a payment plan with creditors and get the Winding Up Petition withdrawn before it is publicly advertised and affects your ability to trade.
In some cases, you may be able to do this through an informal agreement, though a Company Voluntary Arrangement (CVA) can be more suitable. This formal insolvency process is only suitable for businesses that are long-term viable and involves consulting a licensed insolvency practitioner to create a legally binding payment schedule between you and all of your creditors.
Enter Administration
Entering into Company Administration can give a company legally enforced breathing room from creditor action, including the Winding Up Petition. If the courts approve the administration, an 8-week moratorium period will begin which gives the company time to explore its recovery and repayment options. The interests of creditors must always be put first and the court will only allow the company to enter into administration if it believes that the breathing room will result in the debts that have triggered the Winding Up Petition being paid.
Liquidate The Company
If you know that you cannot pay your debts and that the Winding Up Petition has been fairly issued, directors may wish to liquidate on their terms rather than through a compulsory process initiated by the court. Creditors Voluntary Liqudiation (CVL) can make this possible, as this voluntary but last resort process will involve the closure of the business following the sale and distribution of assets to creditors.
How Long Do You Have To Stop A Winding Up Petition?
Before a company can be issued with a Winding Up Petition, the creditor will first issue a Statutory Demand which gives you 21 days to pay the money owed. If you are not able to stop a Winding Up Petition by repaying your debts in this time, a Winding Up Petition can then be issued.
As soon as a Winding Up Petition has been issued, time is of the essence. The Winding Up Petition will be publicly advertised in the London Gazette after seven days. A hearing date will then be set – usually eight to ten weeks later – when the court will make its final decision. However, banks will usually freeze accounts when the Winding Up Petition is advertised in the Gazette which can make it incredibly hard to continue trading. Therefore, the initial seven-day window prior to the public announcement is crucial if you plan to take measures to get the Winding Up Petition withdrawn
With prompt action key in defending a Winding Up Petition, you should seek professional advice as soon as trouble arises. The team of business recovery experts at Ballard Business Recovery can help you understand your options and will act promptly and efficiently to ensure that you can act accordingly if a Winding Up Petition is issued. Get in touch today.
