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HomeFinance and AccountingInsolvencyWhat is a winding-up petition for a company be like?

What is a winding-up petition for a company be like?

A winding-up petition is a notice issued legally by creditors such as HMRC. They intend to force the company into closure. The winding-up petition is represented in front of a judge at the court where he will be hearing the case. 

Often lead up by a statutory demand, the petition is one of the serious notices served legally to any company. Once the company faces the notice, they must act accordingly and immediately. In case there are outstanding debts, creditors like HMRC have to make an application to the courts requesting for immediate wound up of the company. 

Once there is the advertising of the winding-up petitions, courts will order the banks to freeze the bank accounts of the company. It means that the companies will no longer be able to use their bank accounts. Therefore, companies must act promptly if they want to survive. There needs to be a minimum amount of debt for a creditor to file the petition. 

Winding-up order

A Winding-up order is the order from the court that is issued to successfully wind up the company. This order ends up placing a company into liquidation compulsorily. Official receivers are appointed by the court to commence the process of winding as soon as the order is issued. 

Stop the winding-up petition

Multiple factors depend on the stopping of the winding-up process. One of the major factors is how promptly a company starts taking action once the petition is received. There are also many actions that can be taken that may help the company. These actions must be taken within the first seven days:

  • Pay the debts to the creditor. You need to pay the debts to the creditors along with the amount that is needed in serving the petition. In case there are other creditors, who have also attached to the petition, the company needs to pay them also to process the debt recovery. 
  • A company voluntary arrangement or CVA must be negotiated with the creditors of the company.
  • The company can also opt to obtain an order from the administration. This would help to provide a legal restriction of the company so that further credit action is not taken. 
  • Voluntary liquidation must have work. There lies some chance of a company to go for liquidation voluntarily. It mainly depends on the timing and situation. The company must know the standard of the liquidation when it is compared with compulsory liquidation.
  • The company must start negotiating with the creditor. This will help companies. The negotiating process will prevent the creditors from advertising the winding-up petition. The companies will therefore get more time to repay the creditor before the bank accounts and assets of the company are frozen. 
  • One can also request the court for an adjournment. If there is not sufficient evidence the company can request for a cancellation or adjournment. 
  • Dispute the debt is another method. This step is taken by the company when they are sure of the evidence that the debt that is claimed by the creditors is inappropriate and can also be disputed. 

In case the company is successful while proving the dispute, the creditors will be blamed for abusing the application process of the court. This is a very serious process. 

Scenario after the advertising of winding-up petition

The creditors are able to advertise the winding-up petition at least after seven days of the petition issued and served to the company. This may also be till the seven days before the hearing takes place at the court. The advertisement of the petition makes an alert to the other creditors of the petition and also enables them to use the identical petition. It helps them to claim the outstanding amounts they owe from the company. None of the assets of the company can be sold or transferred, once the petition is filed at the court. 

Time is taken to issue the petition

The creditors can submit the petition online, and also follow the instructions to pay the deposit for the petition. Once the deposit is paid, the petition is served. The court and the solicitor will be able to help regarding the matter of serving the petition. From the time, the petition gets served the company will get seven working days to repay the dues. 

 After the end of seven days, the petition will be advertised in the public record. Before the hearing, this procedure will happen in seven working days. The judge will listen to both the creditors and the company and a ruling will be made accordingly. 

The bottom line

A winding-up petition is a very serious piece of the legal notice and should not be taken casually. Companies could end up wounding up if actions are not promptly taken. This can be adjourned or put on hold if actions are taken properly and with great knowledge. 

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