Winding Up Petition Strategies

 

A winding up petition is one of the biggest threats a business could face.  If a creditor brings one to court and a judge agrees that the debt is valid and must be paid then the business is facing an existential threat.

If it doesn’t pay the amount – then it will be closed. So what can you do if you’ve received a winding up petition? Read on to find out some strategies and options you can take but you mustn’t ignore them.

The first step to take is to get some independent professional advice. Insolvency professionals such as Business Rescue Experts will be able to outline in more detail what options you have but also give you specific guidance depending on your exact situation.

There are usually five effective strategies for dealing with a winding up petition.

WUP – Winding Up Petition Strategies

Repayment

Repayment

Any winding up petition can be halted by paying the amount due within seven days of receiving it.  Even if this includes cost, once settled the threat to the business disappears.

If the business pays the debt after the initial seven day period then it already might have a court hearing date in which case company directors will have to attend and present physical evidence that the debt has been settled as verbal confirmation is not considered primary.

Informal Arrangement

Not every business will be able to pay off what could be a large amount in one go but they might be able to pay it off in instalments instead.

This is called an informal arrangement and the business has to set it up with the creditor and stick to it.  Creditors will usually add their costs to this arrangement so it might pro rata be more expensive over the long run than an initial payment.

Adjournment

Adjournment

Asking the court for an adjournment is a good way of securing additional time to raise funds to pay off the debt – but only if there is evidence that this can actually be done.

If a company can make money through selling assets or raising money through other methods then it stands a good chance of being granted. It can also be given if the business is looking at other types of insolvency procedures.

Administration/CVA

Administration

While entering an insolvency procedure just to deal with a winding-up petition is unusual and not recommended, the WUP could just be a symptom of bigger problems that insolvency could fix.

If a company enters administration, for example, all creditor actions including winding-up petitions are frozen as part of an insolvency moratorium which will grant the insolvency practitioner guiding the process to work on the process to give the business the best chance of success.

Similarly, they might want to pursue a Company Voluntary Arrangement (CVA) which will see the business agree to pay off all debt over a longer period, usually five years, in return for a proportion of that debt being written off.

Liquidation

If the business has exhausted all avenues to raise extra funds or pay off the WUP in any other way then a final strategy to avoid winding up would be to close the business themselves through a creditors voluntary liquidation (CVL).

As well as giving directors control of the process including appointing a liquidator themselves it would also provide enough time for them to reach an agreement with creditors as well as perform the other necessary tasks to efficiently close a business and including the writing off of all outstanding debts.

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