Top 4 Ways to Deal With a Winding Up Petition
Receiving a winding-up petition can be a nightmare for a lot of people, and they may want to get away from this situation as soon as possible. Winding up petitions can force a company to liquidate involuntarily and the clauses of the Company Act 2013. Furthermore, it also restricts the company from making any financial decisions without the permission of the court. This may affect the reputation of a company negatively as they may not be able to repay any loans or even pay the salaries of their employees.
What is a Winding Up Petition?
When a company’s creditors are unhappy with the company’s functioning and cannot get their money back after constant requests, they choose to file a winding-up petition. It is a legal process by which the company can be forced by its creditors to pay back their money by selling their assets. This usually happens when the financials of the company deteriorates to such an extent that they are not in a position to pay back the creditor’s money.
In addition to it, the other creditors also start to grow skeptical and start questioning the company’s financials. Now that you have a fair idea of winding up petitions let’s discuss how you can deal with it easily.
Clear all Your Debts
This is probably the simplest way to deal with a winding-up petition. Repay all the money that you owe back to the creditors, and your problems will get solved. However, you can also choose to repay all the money except the sum that must be owed for the creditors to be able to file a winding-up petition. For instance, in the UK, the limit for filing a winding-up petition is 10000 pounds, and if someone owns less than this amount, then the petition cannot be filed.
Discuss a Pay Plan
In case you owe a very large amount to your creditors, you can choose to make a plan for the repayment of your debt. This can be discussed with the creditors in front of a lawyer and then solidified using legal procedures. You can also choose an insolvency lawyer who can study the cash flow of the company and can make an accurate repayment plan for the company. A court can also assign a lawyer who can collect all the payments from the company and then distribute them among the creditors on behalf of the company.
Stand Against The Petition
The company that is facing a winding-up pettion can also choose to challenge it in court. For this, you need to have a good repayment plan in mind that you intend to use to repay the debts of creditors. Usually, the court approves the plan and rejects the petition if the company has good financials and cannot become insolvent any time sooner. However, this is not the case for companies that are insolvent.
A Voluntary Liquidation
If you have tried all the tricks and have still been unsuccessful in making a strong case to protect yourself from the petition, give up. Ask for a voluntary liquidation which will give the directors of the company a little control over the liquidation of assets and distribution of money to the creditors. This is usually the last resort, and there is no coming back from this.
A winding-up petition can well be the nail in the coffin for any company. But if you have strong financials and support from the directors, this situation can be mitigated. You should never hesitate to seek any legal aid when faced with something like this. A genuine professional lawyer can help you get out from this quickly or at least ensure that your company sustains minimum damage.