In order to issue a winding up petition the creditor should have served a Statutory Demand on you, if you did not contact the creditor to dispute the debt when the Statutory Demand was served on you then the court will assume the debt is undisputed.
If you did not receive a Statutory Demand or there are other extenuating circumstances for example you may dispute the facts as laid out in the statement of claim you may have a defence.
When you receive a Winding Up Petition (in the case of a company) or a Bankruptcy Petition (in the case of an individual), it’s important to seek expert legal advice straight away as there are a number of actions you can take to stop a demand becoming a Winding Up Order (in the case of a Company) or Bankruptcy Order (in the case of an individual).
In our experience Compulsory Liquidation and Bankruptcy offers a worse outcome for companies and individuals but it does depend on the specific circumstances of each case and it we would stress the importance of taking advice from professional turnaround consultants and license insolvency practitioners before you make a final decision.
A formal insolvency and rescue and turnaround solution would help protect you or your company but you must act quickly
Formal insolvency processes such a Voluntary Arrangements either a Company Voluntary Arrangement or Individual Voluntary Arrangement, and Pre Pack Administrations offer legal protection to the individual or company against legal recovery action such as Winding Up Petition or Bankruptcy Petition and County Court or High Court litigation and claims.
If a Voluntary Arrangement either a CVA (Company Voluntary Arrangement) or IVA (Individual Voluntary Arrangement) is appropriate then by notifying the other side of the proposed VA is normally sufficient to ensure they do not start legal proceedings such as a Winding Up Petition or Bankruptcy Petition. HMRC own policy is that once a Voluntary Arrangement is received they stop all legal recovery action until the outcome from the Voluntary Arrangement proposal is known. Common sense or a quick phone call will stop most creditors continuing legal action when a formal insolvency process is in progress.
If the matter is very urgent then we can seek an Administration Order from the High Court within 24 hours which protects the company from being wound up or other litigation for a period of time to allow for restructuring or other formal insolvency processes such a CVA, a Pre Pack Administration or Liquidation and Pheonix.
Even at this late stage you can seek consent to place the company into a Creditors Voluntary Liquidation – if you do not understand the advantages of this, call us on 0800 902 0123 for advice.
Top Tip
If you have received a Statutory Demand and agree that the debt is due but need to protect your business then the faster you take action the better. 4R can protect the value of a business and provide that protection fast to allow for a considered review of the business and agree a resolution that works for all the stakeholders.
A Bankruptcy Petition issued to an Individual
The cost if issuing a Bankruptcy Petition is significant and is therefore not normally a frivolous act by the other side but part of a legal process to recover money owed to the creditor.
Most disputes can be settled and resolved by engaging in Professional Dispute Resolution and for a small investment 4R can negotiate and get an agreement in place and get consent to withdraw the petition. Depending on your circumstances 4R’s fee will be based on a successful outcome.
If agreement can not be reached and the petition reaches court then it is important that you understand that if you have failed to respond to a Statutory Demand you may struggle to get the court to hear a defence to the claim. It has been known for the courts under these circumstances to make an individual bankrupt even when there is a substantive dispute alleged.
The court tend to take the view that if you have failed to seek the remedy of a Set A Side in time that an individual has tacitly acknowledged the debt and it is therefore dangerous to rely on defending the claim at the court hearing to determine if an individual should be made bankrupt. Not withstanding this the courts are generally reluctant to make an individual bankrupt at a first hearing, and only allow 10 mins to hear the petition. If their is a dispute the court is more likely to adjourn the hearing to give the parties an opportunity to reach an agreement by consent or to hear the substantive issues at a full hearing.
You will need representation in court on the day (although you can defend yourself if you’re short of funds) and regardless you will need to prepare a skeleton argument and statement of fact and prepare witness statement and your bundle of evidence.
Top Tip
Acting fast and taking professional advice from a specialist solicitor is critical. We would recommend asking your solicitor if they have experience in insolvency law before you engage them. High Street solicitors focus and resources are normally “family law” and “property law” with some litigation experience. Insolvency is very specialised and you can end up engaging a solicitor who will charge you for a process that will not get the matter resolved quickly and cost effectively.
If you have other debts that are pressing or if creditors will not agree to “a time to pay arrangement”, then a formal insolvency solution would protect the company against aggressive legal recovery.
HMRC seeking your bankruptcy for tax debts disputed?
If you are disputing tax debts with HMRC but HMRC have issued a Statutory Demand or Winding Up Petition then give 4R Business Recovery a call and we will assess if we can ask for a HMRC Formal Review of the tax assessment and/or take your case to the First Tier Tax Tribunal (just another Court). Both the review and application to the First Tier Tax Tribunal should delay most bankruptcy petitions.
As a last resort you could consider an Interim IVA, The interim IVA will stop any bankruptcy court from making a bankruptcy order and allow us time to get the situation under control and get the matter resolved.
A Winding Up Petition issued to a Company
The cost if issuing a Winding Up Petition is significant and therefore is not normally a frivolous act by the other side but part of a legal process to recover money owed to the creditor.
Most disputes can be settled and resolved by engaging in Professional Dispute Resolution and for a small investment 4R can negotiate and get an agreement in place and get consent to withdraw the petition. Depending on your circumstances 4R fee will be based on a successful outcome.
If agreement can not be reached and the petition reaches court then it is important that you understand that if you have failed to respond to a Statutory Demand you may struggle to get the court to hear a defence to the claim. It has been known for the courts under these circumstances to order a Compulsory Liquidation of a company even when there is a substantive dispute alleged.
The court tend to take the view that if you have failed to seek the remedy of a Set A Side in time that a company has tacitly acknowledged the debt and it is therefore dangerous to rely on defending the claim at the court hearing to determine if a company should be made subject to a Winding Up Order and Compulsory Liquidated.
Not withstanding this the courts are generally reluctant to order a Compulsory Liquidation of a company at a first hearing, and only allow 10 mins to hear the petition. If there is a dispute the court is more likely to adjourn the hearing to give the parties an opportunity to reach an agreement by consent or to hear the substantive issues at a full hearing.
You will need representation in court on the day (although you can defend your company yourself if your short of funds) and regardless you will need to prepare a skeleton argument and statement of fact and prepare witness statement and your bundle of evidence.
Top Tip:
Acting fast and taking professional advice from a specialist solicitor is critical. We would recommend asking your solicitor if they have experience in insolvency law before you engage them. High Street solicitors focus and resources are normally “family law” and “property law” with some litigation experience. Insolvency is very specialised and you can end up engaging a solicitor who will charge you for a process that will not get the matter resolved quickly and cost effectively.
If you have other debts that are pressing or if creditors will not agree to “a time to pay arrangement”, then a formal insolvency solution would protect the company against aggressive legal recovery.
The London Gazette
All winding up petitions have to be advertised as part of the legal process in the London Gazette. The rule is no petition can be advertised for at least 7 days after proof of serving and must be served at least 7 days prior to the actual hearing. The purpose of advertising the petition is to advise other creditors of the action. The consequences of publication are as follows:
• All business bank accounts will be frozen
• Your suppliers will get updated via credit reference agencies of the pending petition and will freeze further credit and supplies.
• Your other creditors can now “join” the petition and make it harder for you to resolve any disputes and the petition could be joined by genuine creditors who now given the petition want to be paid immediately. Rather like a run on the bank the publication in the London Gazette can set off a series of events which make it harder to resolve.
It’s never too late to take action. Our team of lawyers and para legals can get an adjournment to give you more time, and we may be able to unfreeze your account with a validation order.
Top Tip
A failure to serve the petition properly and or advertise the petition properly are grounds to adjourn the hearing so if you feel this is the case give us call now and we can advise you of how to defend the petition. If in doubt, call us on 0800 902 0123 for advice.
Whatever your circumstances are 4R Business Recovery can and will be able to help you. Simply get in touch with an expert today on 0800 902 0123 to get free advice that will help you cancel out the stress of dealing with any issues you may be facing.
Once things reach this stage you have fewer options, and many people will tell you the business is finished once it reaches this stage and to give up If you believe the business is viable it is important that you act quickly.
Once a Winding Up Order or Bankruptcy Order is made by the court the companies and individuals affairs are handed over to a civil servant known as “The Official Receiver”. The job of the “OR” is two fold:
1. To liquidate (turn into cash) and deal with any assets or value owned by the limited company or individual for the benefit of the unsecured creditors.
2. To investigate the conduct of directors and the performance of their duties with reference to the 1986 Insolvency Act and Enterprise Act of 2002 and take action with regard to Directors Disqualification Orders and Proceedings
Option One – Seek to have the Winding Up Order or Bankruptcy Order Annulled
If you can afford to pay the petitioning creditor(s) claim in full plus their legal costs then we can seek their consent to annul the winding up order. The Official Receiver will normally not have any objection to annulling the order and will also sign a consent form as long as his costs are paid. The ability to annul the compulsory winding up order or bankruptcy order is normally time limited and applications to annul an order of the court need to be made in a “timely” manner, normally within 30 days.
If you want to annul or cancel a Winding Up Order or Bankruptcy Order this can normally be only done with the consent of the other side and done very quickly so call 4R today.
If in doubt, call us on 0800 902 0123 for free advice.
Option Two -Seek consent to take the company out of compulsory liquidation into A Company Voluntary Arrangement
In reality for most limited companies or sole traders entering compulsory liquidation there is very little value to liquidate. If the original directors want to carry on and believe the business still has a future they can seek consent from all the creditors to enter into a Voluntary Arrangement. A Company Voluntary Arrangement is put to creditors with the consent of the Official Receiver and if accepted the compulsory winding up order is annulled and cancelled and the company enters into the CVA to manage the unsecured creditor claims. The petitioning creditor may or may not support the CVA but they can be bond by a majority of 75% of those creditors who vote to agree to the proposal.
4R can help secure the consent of the OR office and negotiate and construct the right proposal to secure the support of creditors and take the company out of the OR office back into the control of the directors.
Within four weeks you could be back in control of your company trading again and out of compulsory liquidation.
Option Three – Seek consent to for an Individual to come out of Bankruptcy and into an Individual Voluntary Arrangement
In reality for most limited companies or sole traders entering compulsory liquidation there is very little value to liquidate. If the original directors want to carry on and believe the business still has a future they can seek consent from all the creditors to enter into a Voluntary Arrangement. A Company Voluntary Arrangement is put to creditors with the consent of the Official Receiver and if accepted the compulsory winding up order is annulled and cancelled and the company enters into the CVA to manage the unsecured creditor claims. The petitioning creditor may or may not support the CVA but they can be bond by a majority of 75% of those creditors who vote agreeing to the proposal.
4R can help secure the consent of the OR office and negotiate and construct the right proposal to secure the support of creditors and take the company out of the OR office back into the control of the directors.
Within four weeks you could be back in control of your company trading again and out of compulsory liquidation.
Option Four – Purchase the Assets
If you need help stopping a statutory demand or winding up petition (and subsequent order) get in touch on 0800 902 0123 for an informal chat.