How Do I Stop A Winding Up Petition? Top 5 Options
All companies have a duty to pay their liabilities to creditors according to an agreed payment schedule. However, if a company runs into financial difficulty, this can be easier said than done. If a company becomes insolvent and is unable to pay their liabilities as and when they fall due, it is their responsibility to prioritise the interests of creditors. This may be done by seeking business rescue guidance or voluntarily liquidating the company. If they do not act then creditors who are owed money by the business may take matters into their own hands by issuing a Winding Up Petition (WUP). This is a petition to the court for the company to be forcibly wound up. This is a last resort taken by creditors, that if granted by the court, will result in the company being wound up, with the assets distributed in order to repay creditors.
If your company is facing legal action from creditors in this way then you may be wondering “how do I stop a winding up petition?”. Is it possible to stop a WUP, and if so, what is the process? In order to have a chance of stopping the petition, it’s crucial to act promptly. There are 5 different ways that it may be possible to stop a WUP. These include:
Repay The Money That Is Owed
If at all possible, the best option for stopping the consequences of a WUP is to repay the money that is owed to creditors. However, as businesses facing a WUP are struggling to pay their debts, this isn’t likely to be a realistic option for most companies. They will need to have enough funds to cover the debt owed as well as creditor’s costs.
Agree A Time To Pay Plan
How do I stop a winding up petition if I don’t have the money to repay the debts? As we mentioned previously, most companies won’t be in a position to repay the money owed. However there are other options. One of these options is to agree to a repayment plan with the creditors. This can be done via:
Company Voluntary Arrangement (CVA): This provides companies with a moratorium (an automatic stay on any legal action taken against them), giving them the breathing space that they need to restructure with the guidance of a licensed insolvency practitioner.
HMRC Time To Pay: If debt is owed to HMRC then you may be able to organise a ‘time to pay’ agreement with them. This is a tailored repayment scheme which is unique to your business’ financial circumstances.
Dispute The Winding Up Petition
When discussing the question of “how do I stop a winding up petition”, we’ve been emphasising the importance of acting promptly. This is particularly important if you’re hoping to dispute the petition. Once the petition has been issued, there is a seven day window in which companies can apply to the court for an injunction or validation order. In order for a dispute to be valid, the company will need to provide legitimate evidence for the debt itself to be disputed, or provide evidence of how they intend to repay the debt (in the case of validation orders).
Enter Administration
Entering administration will protect the company from further legal action by giving them a statutory moratorium from creditors pursuing the business. This gives companies the time and space required to rescue the business in order to repay debts, or to organise the sale of the business on a going concern basis.
Creditors Voluntary Liquidation (CVL)
If creditor pressure is overwhelming, and there is no realistic prospect of the company being able to recover or repay the debt, then the best option is to enter voluntary liquidation. A CVL prevents further legal action and ensures that all company affairs are wound up correctly so that directors can trade again in the future. It also ensures that members of the business can claim redundancy and other statutory entitlements from the government. This is much more advantageous than the company being forcibly liquidated as the result of a WUP being granted. It is a much better reflection on directors of the company, ensuring that they can trade again as normal in the future.
In summary, there are 5 possible options to consider in answer to the question of “how do I stop a winding up petition”. However, wherever possible, it’s always best to prevent the company getting to this point in the first place. Winding up petitions are difficult to recover from. This is why it’s essential for businesses to act at the first signs of financial trouble, rather than allowing issues to escalate. Seeking the guidance of a licensed insolvency professional at the first signs of trouble will provide the company with more options for recovery. Please don’t hesitate to get in touch with the team at My Liquidation today for confidential advice.
