This is not a cheap option for suppliers to do and can cost up to £800 just to start the winding up petition. It will cost them thousands in court fees so it is used as a last resort.
Contact an Insolvency Practitioner
When you receive a winding up petition, it does not mean that it is the end of your business. It is possible to stop it but you need to get the right advice. This means contacting an insolvency expert. The expert will be able to look into your situation and offer advice on the best way to deal with this.
If you really believe that you can pay off the debt and become viable once more, the experts will offer options to help with this method.
Agreeing to Pay Off the Debt
If you want to continue trading, one option is to create a Creditors Voluntary Arrangement. This is one of the most common methods and is commonly preferred by creditors. You will guarantee that you will pay them the money owed over a period of time through this agreement that is completely legally binding. It also means that the creditors cannot hassle you for more money unless you break the terms of the agreement.
This is beneficial for the creditors since there will be the fear that liquidating your assets will lead to not enough money to pay them. The money from liquidation is split up between various creditors, and HMRC are always the ones at the top of the list. A company cannot be forced to pay more money than the liquidation value, unless the company directors or owners are personally liable.
Selling the Company
Another option to keep trading is to sell off the company. There are different methods available for this, including a Pre-Pack Administration. A Pre-Pack Administration is excellent for companies that can prove they can become viable again in the future. The business owner has a say in who buys the company and the terms of the sale. This can help protect the jobs of employees and make sure it continues in the direction initially started.
The benefit of selling the company is that new management takes over. They could handle their money and cash flow a lot better, which decreases the chance of financial issues in the future. A Pre-Packed Administration can also lead to some of the debt being wiped clean so that the new owners can start afresh.
It is essential to seek advice when receiving a winding up petition. This helps act legally so that you are not accused of wrongful trading. It will also help you find the best way to keep your company trading, whether you keep ownership or not.
Alex has written many articles for Real Business Rescue over the last year. She writes about topics including HMRC and tax, cash flow and financial problems, business start-ups and insolvency options for business owners. Real Business Rescue offers professional advice from Insolvency Practitioners for business owners and company directors.