What Is a Winding up Petition?
A winding up petition is a request to the Court, from a creditor that is owed more than £750, for an Order of the Court to wind up a company. Once made in practice this brings a company to the end of its trading life. The Company ceases to trade, its employees are dismissed, and the company shuts its doors.
The Official Receiver, a Government department, investigates the company and the conduct of the directors to ensure that they have acted properly and according to their legal duties. If the conduct of the directors has fallen below that expected of the ordinary reasonably prudent director, they may be faced with company director disqualification proceedings and antecedent transaction claims.
The company’s assets are realised to pay off the debts of the company, often by the Official Receiver or an Insolvency Practitioner appointed as liquidator.
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Stopping A Winding up Petition
There are several ways of doing this:
- The debt could be paid in full, plus costs and the Winding up Petition would be dismissed on the hearing date, if not before if the petition has not been advertised when the petition debt has been paid in full, unless at the hearing of the petition another creditor seeks substitution.
- The company can make a deal with the creditor to dismiss the petition at the next hearing on the basis that agreed payments are made over a period of time, although in our experience a creditor will not ordinarily agree to this unless they are proffered some form of security or guarantee by a third party such as a director or an associated company.
- The director can instruct TaxGone to the assist in preparation of a Company Voluntary Arrangement.
The winding up petition could be adjourned to enable the company to put forward a Company Voluntary Arrangement. The Winding up Petition will be dismissed at the next hearing provided that the Company Voluntary Arrangement is accepted.