Winding Up Petitions
Winding up petitions are applications made to the Court. The aim of a petition is to prompt the court to grant a winding up order – which places your company into liquidation.
There are a variety of reasons a creditor may wish to file a winding up petition and attempt to close your company. Most of the time, creditors will only file winding up petitions after other methods of debt recovery have been ignored. If a creditor files a winding up petition, they will be granted a hearing with the court to present the petition. Your company will need to respond to the petition – if there is no response, the court could issue a winding up order against your company.
Why are winding up petitions important?
A winding up petition is an extremely serious statement of intent from a creditor. It signals that a creditor has exhausted all means of debt recovery and believes its only option for recovering its debt is to liquidate your business. Winding up petitions are far more serious than demand letters from creditors. The process of issuing a winding up petition is usually thought of as a “last resort” for a creditor – a final step taken only after all degrees of trust have broken down.
If your company receives a winding up petition, it faces severe limitations on what you, as a director, can and cannot do. After a petition has been received, you can no longer sell any of the company’s assets, put the company into a CVL, or place the company into administration (ADM) unless the petition has been disposed of.
In addition to placing restrictions on your company’s actions, a winding up petition can also lead to negative publicity with other creditors. After seven days, winding up petitions can be advertised in the Gazette to notify other creditors.
Are all winding up petitions legitimate?
Many debt disputes arise when creditors and debtors cannot agree on the legitimacy of a debt. Winding up petitions can be filed maliciously for debts that your company does not agree to or believes it does not owe. If your company receives a winding up petition for a debt that it does not believe is legitimate, it should engage legal advice as soon as possible. Several options can be pursued to respond to abusive petitions and prevent them from being advertised.