If liquidation seems inevitable then it may well be possible for arrangements to be made whereby the directors or any interested third parties can purchase some or all of the company's assets. It may also be possible to stop or postpone the petition from being advertised by obtaining an injunction to restrain advertisement. If the company has any valuable assets that could be used as leverage, then asset financing may be a last resort fundraising method to consider.
If you cannot raise the funds needed to repay the debt, then you would need the assistance of a licensed insolvency practitioner to facilitate the first three options above. If you are unable to respond or mount a defence within seven days of receiving the winding up petition, it is almost certain that the court will grant the winding up order. Option 4: Pay the debt in full If your company is eligible for alternative funding, such as invoice factoring or asset-based lending, you could gain access to a cash lump sum that would clear the debt in full.
By paying the debt in full, or arranging an instalment plan, you may feel that the company is safe from further action in relation to the winding up petition, but this is not the case. Withdrawing the petition in this way offers protection for both you and the petitioner - if another creditor successfully uses the petition to wind up the company, the full repayment would need to be returned to the liquidator.
This inherent problem also applies if your company repays the debt in instalments. The petitioner has to decide whether to keep the winding up petition in place and risk another creditor using it to recover their own debt, or have it struck off the court record before all instalments have been received. Their decision is likely to be based on the financial facts and figures available on your company, and how much they trust you to meet the new repayment arrangements.
They would be able to issue a new winding up petition should you renege on future repayments, but this would involve further high cost. One thing to realise when you have received a winding up petition from creditors is that this was no easy decision for them to make.
It is quite a serious matter that could eventually cost a great deal of money.. If you are successful in arguing against the petition, their fees may be added to your original debt amount before the petition is dismissed from court. The upside is that your business might carry on trading for years to come, move past its current financial distress and become profitable again.
With the input of an insolvency professional, negotiations for a Company Voluntary Arrangement or the sale of some of your business assets could resolve the situation without further issue. If the winding up petition has been advertised in the Gazette and your bank accounts are already frozen you are in a particularly bad situation. At this point you may still be able to seek an adjournment, but any further delay will completely eliminate the chances of recovery.
It should be noted that you may be able to unfreeze your bank accounts by obtaining a validation order. Realistically, you will have to start taking action within days of being issued the petition if you want to avoid liquidation. Even so, if the hearing has not yet taken place there is still hope. Contact one of our insolvency practitioners immediately to find out what can be done in the later stages of the winding up process.
Clearly, placing the advert in the London Gazette is a pivotal moment during this process, so delaying or averting this step is a valuable objective for the company and its advisors. So what would be required to successfully obtain an injunction to restrain the advert? Would your company be eligible, and what supporting documentary evidence is necessary? The case for an injunction must demonstrate that a substantial dispute exists surrounding the debt, and be supported by witness statements detailing the grounds on which the application is based.
It must be shown that your company has a counter-claim against the petitioning party, or that the debt in question can be set-off against monies already owed to your company by the creditor.
The application for an injunction must adhere to UK insolvency rules, and explain why your company has not paid the amount being claimed by the creditor. Obtaining an injunction is a complex process that needs to be completed under strict time limits. It also requires specialist legal assistance. If the application is successful, an injunction is usually granted temporarily until a full court hearing can be arranged where the legitimacy of the dispute is discussed. One of these instances is when the company is insolvent.
Director misconduct and wrongful trading — under insolvency law, a company must cease to trade as soon as directors are aware that it is insolvent, or is likely to be insolvent in the near future. You may be held personally liable for any additional debt incurred from the date of insolvency if you do not stop trading. When fraudulent activity is suspected — attempting to defraud company creditors by deliberately avoiding repayment of debt, for example.
The two most common types of antecedent transaction are: Preferential payments: where a creditor has been placed in a more favourable position following the payment. For example, when a lender is paid ahead of other creditors because the director has provided them with a personal guarantee which they fear will be called upon. Transactions at an undervalue: this is when an asset has been sold at considerably less than its true market value, for instance if ownership of property is gifted to a family member or another director.
Under the Company Director Disqualification Act, , you could be penalised for various types of director misconduct, including misfeance wrong doing , trading whilst insolvent, and fraudulent trading. They will need to contact the Redundancy Payments office in order to claim for any arrears of wages, holiday pay owed, redundancy pay and pay in lieu of notice owed.
The Official Receiver will therefore consider pursuing remedies to undo these transactions. Extremely serious. A winding up order can be a stressful time for any director and part of this anxiety is the uncertainty over an insolvency process which you cannot control. Moreover since 1st October , a new law has come into existence with the introduction of Compensation Orders which are designed to target directors once they have become disqualified.
This can result in a director being made to contribute to the insolvent estate in the event that it is proven that the loss to creditors arose as a result of their misconduct as a company director. Although it is uncommon, it is possible for a winding up order to be reversed in a number of ways. However, this will undoubtedly be an expensive process as you will need to instruct both solicitors and other professionals to assist in this process.
Once your company has been wound up you will be sent a copy of the winding up order to the registered office address. You will need to completed Form 7. Clearly, your argument may be that the court did not have all the relevant information when making the decision of the winding order and you will need to persuade a judge to reverse the decision.
It is possible to appeal the winding up order. However, this remedy is limited and can only take place on the basis that the decision was wrong or unjust due to serious procedural or other irregularities. Once that period has passed and the debt remains unpaid, the creditor can ask their legal team to apply for a compulsory winding up order.
From that point, it generally takes around 28 days to wind up the company. The winding up petition is sent to and reviewed by the court. The company then has seven days to act.
If it fails to act or runs out of time and the court approves the winding up order, the liquidation process will begin. The court will appoint an official receiver to take over. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. What Is Winding Up? Key Takeaways A company that is winding up ceases to do business as usual.
Its sole purpose is to sell off assets, pay off creditors, and distribute any remaining assets. Winding up a business is not the same as bankruptcy, although it is usually an end result of bankruptcy.
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Related Terms What Everyone Should Know About Corporations A corporation is a legal entity that is separate and distinct from its owners and has many of the same rights and responsibilities as individuals.
Liquidation: What You Need to Know Liquidation is the process of bringing a business to an end and distributing its assets to claimants, which occurs when a company becomes insolvent.
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