Receiving a winding up petition can feel like the end for your business, but it doesn’t have to be. If you act quickly, you may still have a number of different options depending on the Company’s circumstances and your ongoing goals for the business.

When you receive a winding up petition, it will provide you with a date of the hearing which is the date on which the Company will actually be wound up. Initially, only you and the petitioning creditor will be aware of the winding up petition. However, prior to the hearing date the winding up petition is advertised in the London Gazette. At this point your Company bank account will be frozen and it will be impossible for you to continue to trade.

There is usually no way of knowing how early the winding up petition will be advertised and as such it is critical that you seek advice immediately upon receipt of the winding up petition. To help you understand how you might proceed, we have set out some of the main options below.

Summary of Your Main Options

1. Place the Company into Creditors' Voluntary Liquidation (CVL)

If your business has assets or you want to try to save all or part of the underlying business then it may be more appropriate to place the Company into CVL. This is a Liquidation which is instigated by you as a director using an Insolvency Practitioner of your choice.

Voluntary Liquidation has the following benefits:

• Nominate a Liquidator of your choice who will work with you to ensure the best advice for you and your business;
• Leave the company debts behind to be dealt with by the Liquidator;
• Set up a new debt free business and buy back business assets for their market value;
• Get out of any leases that are no longer required;
• Lay off redundant staff who can then be paid redundancy and outstanding wages by the Redundancy Payments Service;
• Close the Limited Company in a fast and controlled manner enabling you to shut down and move on if you don’t want to continue.

Once the Company is in Liquidation, it is the job of the Liquidator to sell the Company’s assets for the maximum amount possible. More often than not, the Company assets are of most value to you in a successor business (known as a Phoenix company) and as such you are able to make an offer to buy them back without the burden of the Company’s historic debts thus allowing you to save the underlying business. You may also find that the assets seem cheap compared with their original purchase price as their value has decreased significantly over time.

If you have already received a winding up petition the petitioning creditor will need to agree to either withdraw or dismiss the petition in order for the Company to be placed into CVL. A good Insolvency Practitioner will usually be able to agree this with the creditor's Solicitor on your behalf although you are likely to have to pay the petitioning creditor's legal costs to date which are usually in the region of £1,000 to £2,000. You will also need to act quickly as the Insolvency Practitioner will ideally need a couple of weeks between your instruction and the date of the winding up hearing in order to complete the CVL appointment process.

You can find out more about Voluntary Liquidation, including details of the process and likely costs on our dedicated Creditors Voluntary Liquidation page.

You can also find out about making employees redundant and about your redundancy rights as a director on our Redundancy page.

2. Place the Company into Administration

If you want to save your business but your Company cannot continue to trade with the threat of the winding up petition hanging over it then it may be most appropriate to place it into Administration as this can provide near immediate protection from any form of recovery action.

The Administration process is usually started by the directors filing a form at Court called a Notice of Intention to Appoint an Administrator. However, if your Company has received a winding up petition then the directors are no longer able to appoint an Administrator themselves. Instead, you must either make an application to Court for an Administration Order or alternatively you could approach one of your secured lenders such as your bank or factoring company who can still appoint an Administrator.

This can be a complex process and it is extremely important that you have a well thought out and constructed plan before approaching either the Court or your secured lenders, otherwise they are unlikely to support you. The right Insolvency Practitioner will take the time to explain the process and will ensure that a well structured plan is agreed with you before the Administration process is started.

Depending on the nature of your business and the assets involved, it may be that Pre Pack Administration is a more appropriate course of action. In a Pre Pack, a sale of the business and assets is agreed with the proposed Administrator prior to his appointment.

You can find out more about Administraion here and about Pre Pack here.

3. Look to Agree a Company Voluntary Arrangement (CVA)

Despite receiving a winding up petition, it may still be possible to agree a CVA providing you act quickly. However, in order to be successful, the CVA will require the petitioning creditor to be willing to withdraw or dismiss the winding up petition. It is therefore essential that a realistic proposal is put together and discussed with the petitioning creditor as soon as possible.

…we can guide you through all aspects of the restructuring process.

A CVA is particularly appropriate if you have received the winding up petition as a result of cash flow difficulties which have arisen as a result of an isolated incident such as a bad debt or if you have have already made changes to improve profitability.

In order to be successful a CVA requires the support of your creditors who are asked to vote on the payment plan that is being proposed. Because of this, it is important to speak to us as early as possible so that we have the time to properly review your cash flow forecasts and put together a viable CVA proposal that your creditors are willing to back.

You can find out more about proposing a Company Voluntary Arrangement here.

4. Pay the Debt

This seems obvious but all too many businesses get so caught up in the stress of receiving the winding up petition that they forget the obvious. If you believe your business has a future in its current form then you can contact the creditor or their Solicitor and agree to pay the debt. This may be as a lump sum or the creditor may agree to a repayment schedule.

If you take this route, you need to make sure of 2 key considerations. The first is that your business must be able to continue without any formal restructuring. If it cannot, then by paying the debt you are simply delaying the inevitable as another debt will soon build up and take its place. The second is that you must ensure that whatever terms you agree, you get the creditor to give you written confirmation that the winding up petition will be withdrawn or dismissed. Otherwise, you could be making repayments with the threat of the winding up petition continuing to hang over your Company.

5. Do Nothing

This doesn’t mean simply ignore the winding up petition without first reviewing your business situation. However, if your Company has no assets and you have no desire to continue in business then it may be appropriate to simply ignore the winding up petition and allow it to proceed.

In this case, a winding up order will almost certainly be made in your absence and the Company will be placed into Compulsory Liquidation. This will initially result in a Government official called the Official Receiver being appointed over the Company’s affairs. The Official Receiver will then contact you to request information relating to the Company’s assets, liabilities and its trading history in order to make a decision on how to proceed with the winding up.

However the Official Receiver decides to proceed, the winding up will bring about a formal end to the Company’s existence.

To find out more about your options when faced with a winding up petition or to discuss one of the processes outlined above, call us free on 0800 066 3122