A winding-up petition is a serious legal notice. If your company receives one, your first priority is to get it withdrawn to avoid compulsory liquidation. Here is a guide to the process.
What is a Winding Up Petition?
A winding-up petition is a legal notice filed with the court by a creditor who is owed more than £10,000 and has not been paid for over 21 days. In essence, the creditor is asking the court to put the company into compulsory liquidation.
The Steps to Get a Petition Withdrawn
If the debt can be paid, the winding-up petition can be withdrawn, removing any further threat of liquidation. Here is a step-by-step process for getting a petition withdrawn before it’s too late.
- Obtain Written Permission: The creditor must get written permission from an officer of your company to settle the debt out of court. This letter should state the creditor’s intention to withdraw the petition once the debt is paid.
- Agree on a Settlement: A settlement should be agreed upon and executed between your company and the creditor.
- Get Written Confirmation: Once payment is received, the creditor should notify your company in writing that the debt has been settled and they intend to withdraw the petition.
- Apply to the Court: Your company must apply to the court for permission to withdraw the winding-up petition. Note: This must be done at least five days in advance of the petition hearing and the petition must not have been advertised yet. You will need to provide proof of the settlement and the creditor’s intent to withdraw.
- Send Written Notice: Once the court has granted permission, a letter should be sent to the court and copied to all involved parties as proof that the petition has been withdrawn.
Other Outcomes if a Petition Isn’t Withdrawn
If the petition is not withdrawn, the following can happen:
- It Can Be Adjourned: The court can grant a postponement if your company can convince the court that it can pay the debt and continue to trade. Adjournment gives your company the breathing room it needs to collect money owed and prepare for an insolvency procedure.
- It Can Be Disputed: The petition can be dismissed by the court if you can provide proof that it is invalid or inaccurate. When this occurs, the court can order the petitioning creditor to pay hefty costs.
- It Can Be Dismissed via a CVA: The court can dismiss the petition if it determines your company can repay all or some of the debt through a Company Voluntary Arrangement (CVA). A CVA creates a payment plan to pay back debt over a period of 3-5 years.
Final Advice
If a winding-up petition is not withdrawn or dismissed, the court will eventually grant a winding-up order, and your company will be placed into compulsory liquidation. The key is to act quickly and understand all your options.
For further guidance and expert advice, contact us today on 0800 970 0539.
