The consequences of a winding up petition can be incredibly serious if no action is taken, meaning it is essential for you to know exactly how to act should one land on your doorstep. Failing to resolve the issue could result in the loss of everything you have worked hard for.
Receiving a winding up petition will undoubtedly be an incredibly stressful time as a business owner, particularly if you are aware that your company has been struggling for a while. However, this does not necessarily mean the end for your firm, and you may still have options to turn around your fortunes and stage a recovery. Seeking specialist guidance at your earliest opportunity is one of the best ways to achieve this.
What Does a Winding Up Petition Mean?
A winding up petition is typically a last-ditch attempt by creditors to recoup monies that they are owed. As the name suggests, it is a petition to the courts to wind up the debtor’s company, so the proceeds of its liquidation can be used to pay back as much of the debt as possible.
In essence, a winding up petition acts as a warning shot to the debtor that the future of their business will be put into jeopardy if they do not take decisive action, either by settling the debt outright, or coming to a suitable arrangement. Indeed, the most serious of all the consequences of a winding up petition is that it could lead to the compulsory liquidation of your firm if no attempt is made to resolve the situation.
That being said, a compulsory winding up petition has many other potential pitfalls along the way that could make the situation worse and harder to navigate.
The Consequences of a Creditors’ Winding Up Petition
There are many far-reaching consequences of a winding up petition that, if left unchecked, could do serious harm to your company. These range from the freezing of your business bank account, to legal costs, and potential damage to your reputation. Seeking specialist assistance at your earliest opportunity is vital to ensuring as little harm comes to your firm as possible.
The sooner you contact a business recovery expert, the more options you may have to resolve the situation and give your firm a stable future. Of course, it still could be a bumpy ride, so it is important you understand all the potential consequences of a winding up petition from the outset so you can be completely prepared should one arise.
A Deadline is Set
Usually, there will be a window of just four-to-eight weeks between the receipt of a compulsory winding up petition and it being escalated to a winding up order. This only gives business owners a narrow timeframe in which to try to save their company.
There are several actions you can take to defend a winding up petition and mitigate the potential consequences involved. This is provided you move quickly and decisively.
Other Creditors Joining the Mix
As soon as a creditor issues a winding up petition, it will be advertised in the London Gazette. This could alert other creditors to the fact that your business is in trouble, and may prompt them to join in with the petition in the hope of getting back what they are owed.
Known as a ‘change of carriage’, this is one of the most serious consequences of a winding up petition, as it could cause your current situation to escalate dramatically. A change of carriage will obligate you to not only settle up with the people who petitioned to wind up your business in the first place, but everyone else who subsequently joins the fray.
Freezing of Business Bank Account
If your creditors are able to get wind of the fact that a compulsory winding up petition has been served against you, so will your bank. Once this happens, your business bank accounts will be frozen — meaning absolutely no payments can come in or out.
The reason for this is simple. If you have received a winding up petition, you are legally not allowed to let any of your company’s assets be diminished. Examples of this include:
- Making any payments to yourself
- Settling up with other creditors not named on the winding up petition (known as a preference payment)
- Selling your firm’s assets
Should any of these happen while a winding up petition is in effect, you could find yourself personally liable for repayments.
Damage to Your Company’s Reputation
Aside from the complete closure of your company, this is one of the most long-lasting consequences of a winding up petition. The reason for this is simple. If a creditor is forced to try and liquidate your firm, it is a clear sign that your operations are not stable — and it could seriously put other firms off wanting to do business with you.
Potential clients or suppliers may well be wary of dealing with someone who has had a winding up petition served against them before in case the same thing happens again.
It is also possible that you may find it more difficult to obtain credit in the future, even if you manage to stave off the winding up petition. This is because lenders will be wary of affording you credit in case they have difficulty getting their money back further down the line. As such, they may insist on much stricter terms, such as a personal guarantee or rigid repayment schedule.
Costs Associated with a Winding Up Petition
Unfortunately, the filing of a winding up petition does not mean that you only need to pay what you owe. Additional costs will include your creditors’ legal costs (if the winding up petition is proved to be valid) and your own legal fees.
What Happens After a Winding Up Order is Granted?
A winding up order means the imminent closure of your business. Once granted, your firm will be marked for compulsory liquidation, the Official Receiver is appointed, and all the assets of the business are sold. An investigation into your conduct will also take place.
Just like that, everything you have worked so hard to build will be gone. This is why it is so important to seek assistance the moment you receive a winding up petition, as you will have a greater chance of staving off this eventuality.
Need Winding Up Petition Help? Contact Inquesta Today
If you have received a winding up petition and in need of specialist guidance, you can rely on Inquesta for help. We understand the potential consequences of a winding up petition can be a huge cause of concern for business owners, and are dedicated to making this stressful time as straightforward as possible.
The Inquesta team are experts when it comes to defending a winding up petition and turning around the fortunes of a struggling business — and have worked successfully with firms in all areas of industry. This leaves us perfectly placed to assist you.
We will take the time to get to know your individual circumstances and provide what we believe is the best solution to suit your needs. A tailor-made, holistic service that puts your requirements first.
Dealing with winding up petitions is just one of the areas surrounding company insolvency and business recovery that we are able to assist with. If you are struggling financially and not sure where to turn, we are here to help. Contact our team today or request a free consultation.