A frequently asked question and with HMRC, builders merchants, suppliers and other creditors claiming down on slow payment there are signs that the use of winding up petitions is on the rise.
We are often told, "well a creditor has threatened a winding up petition but we don't think they will do it". Wrong, HMRC in particular is moving from 7 day warning letter to petitions quickly now.
So if you have a threat of a winding up petition act fast - get advice from a professional turnaround or insolvency advisor and make sure you maintain a dialogue with the creditor. We suggest that you make modest payments on account if at all possible.
By not acting, the directors may allow an irate creditor (such as the Crown for taxes) to issue a winding up petition.
This can lead to greater risk for the directors and any shadow directors. The Official Receiver or subsequent liquidator will interview the directors and officers of the company to examine their conduct.
Most often there is little return for the creditors.
Once a winding up petition has been served on the company the board may not
- Sell any of the assets or
- Propose a creditors voluntary liquidation and
- Cannot appoint an administrator without an expensive Court application
- Once a winding up petition has been advertised the company’s bank account will be frozen.
We would urge directors to avoid this at all costs. You must make a decision to act.