Winding Up Petitions

Company directors worry about many things when running a business - workload, payment, staff issues, cashflow - the list is endless. But few things can be more worrying and stressful than having a winding up petition served upon the company.

Winding up petitions (WUP) rarely show up "out of the blue". They are almost always the result of director's ignoring the symptoms of insolvency ie. can the company pay its debts as and when they fall due?

Unfortunately, we are currently seeing a trend from creditors using WUP's as a method of forcing companies to pay their debts. While this may be deemed as a misuse of the WUP, it nevertheless cannot and should not be ignored if one is received. Once a petition has been advertised in the London Gazette, the company bank account will be frozen resulting in a cessation of trading!

If a company can prove it's ability and intention to satisfy the debt of the petitioning creditor, a validiation order can be applied for in order to unfreeze the bank account. This is a costly process as it requires the directors to appoint legal counsel to make the application. As the company bank account will be frozen, and access to company funds made impossible, the directors would have to fund this themselves!

If a company is experiencing cashflow problems and creditors are applying pressure for payment, it may be possible to make an arrangement or time to pay deal (TTP) with them in order to avoid this sort of aggressive action being taken. The HMRC for example will usually allow a company to apply for a TTP deal as long as the company is fully compliant and up to date with its filing of returns etc. 
Warning! Any TTP deal requires full repayment of the debt and failure to satisfy the terms of the deal usually results in aggressive action from the creditor!

If a company finds that it's debts are insurmountable if payment is demanded in full and the directors acknowledge the fact that the company is insolvent (s123 Insolvency Act 1986) but still viable, a company voluntary arrangement (CVA) can be proposed to the creditors. If the creditors agree the proposal, this can enable up to 70% of the unsecured debts to be written off and the remaining debts restructured and repaid over a period of up to 5 years.

A CVA is a very discreet process and is not advertised, therefore, your clients need not know of the company's situation.

If your company is experiencing any of the issues mentioned above, why not call KSA Group on  0800 9700 539 or visit www.companyrescue.co.uk for free advice on all insolvency issues!