Whilst this can be a fairly costly and lengthy process, one of the more common creditors who are not afraid of issuing winding up petition are HMRC, currently issuing more winding up petitions than any other creditor.
A winding up order is a serious threat to the running of your business and following liquidation directors can face possible personal liability for company debts. Once you are in this position you should not delay in seeking advice from a licenced insolvency practitioner and taking immediate action to avoid liquidation.
Once the winding up petition is served at your registered office you will have only one week before the details are free to be published in the London Gazette. Unfortunately, once this information is publically available your bank is likely to freeze your accounts and other creditors and customers will also be privy to such information.
It is extremely important therefore to act quickly when you are facing a winding up order to stop this petition advertisement and save your business.
A winding up order does not have to mean the end for your business. Here are three possible options available that allow you to continue to trade if you act quickly:
1. The first option available to you to avoid a winding up order will be negotiating a formal Company Voluntary Arrangement (CVA). A CVA can stop a winding up procedure in its tracks and you may be able to write off up to 75 per cent of your unaffordable business debt. A CVA allows the creditor to receive an affordable percentage of the debt owed over a maximum of 5 years whilst you legally write off the remaining balance and continue to trade as normal. In most cases creditors will agree to a CVA as it highlights a positive step forward to make improvements to your business and provides a greater possibility of them receiving arrears owed.
2. An alternative option will be to apply to the Court for an adjournment which will allow you time to contest the debt, or request more time to pay either HMRC or another creditor. If the Court grants adjournment, any legal action will be paused against your company whilst you address these options.
3. Finally, you should also consider any valuable assets that the business owns and investigate the possibility of appropriate asset financing to raise the required funds to pay outstanding debts and avoid a winding up order altogether.
When you are facing a winding up order it does not have to mean the end of your business and if you act quickly there are options available, but speed is the key and involving an insolvency practitioner at the earliest opportunity to review your options can save your business.
Written by Carl Faulds
Carl is a business recovery specialist. He started work in the Business Recovery profession in 1990 and has continued to pursue an ethos of working with distressed businesses to help them overcome their financial problems. As Managing Director of Cashsolv, he offers advice and support to overcome cash flow problems and identify possible underlying problems that can be addressed to ensure a positive future for your business. Follow him on Twitter @CashSolv_Carl and @Cashsolv.