What is a winding up petition?
A winding up petition is the application for a forced/compulsory liquidation of a limited company or partnership. This is usually initiated by a creditor (person/business that your company owes money to). Winding up petitions should never be ignored. There can be serious implications if communication with the relevant creditor or immediate action is neglected at this stage. It is critical for the director/s to act swiftly and even at this stage the business and or company may be saved.
The company being ‘wound up’ will be investigated by the Official Receiver (Except Scotland). The director’s actions or lack of action is specifically scrutinised by the Official Receiver and evidence of wrongful trading will be investigated.
The director of a company that is forced into company liquidation statistically is more likely to be subject to company director disqualification (CDD). The Official Receiver (Except Scotland) main aim though is to get the best return for the company creditors.
Be aware it is very rarely in the interests of the director to allow themselves to be wound up due to the lack of control and risks to director/s. You must seek professional insolvency help immediately. Your accountant is unlikely to be able to advise accurately and a wrong decision at this stage can be fatal for the insolvent company.
In the majority of cases provided we are contacted earlier enough before the hearing date we can usually rescue the company and or business. The solution may be a company voluntary arrangement, creditor voluntary liquidation, company administration or negotiations with the creditors.
Be aware HMRC are responsible for more winding up petitions than everyone else put together.
Written by: Mike Smith