When creditors fail every single attempt of recovering a debt that they had lent to a business company, often, as a last resort, they use the HMRC “Winding up Order” or petition. This is an order that they petition the court to ensure that the intended company is liquidated. This way, the court aids the creditor company to recover the amount of money that they lent.
How Serious Is It?
It takes quite a great deal of money on the creditor’s part to place the petition to the court about the intended company for liquidation. No doubt, this is a serious issue that the creditor company agrees to go to this extent. Once the petition is formed, there is technically no other option left for the company to repay the amount that it owes to the creditor. The business is liquidated, and hence, there is no other resort that it can take.
What The Petition Does To You?
The creditor, which in most cases is Her Majesty’s Revenue and Customs (HMRC), can petition to the court about your company’s inability to pay back the due credits and payments and the inability to meet the liabilities. In this case, the court will announce a “hearing date,” on which the petition will be read out to the company. It is by this time that the debtor company will have to take all the necessary legal actions to prevent this petition or at least handle it skilfully.
Can You Avoid It?
Not appearing for the hearing and not mounting up any defense will end up with the announcement of the “Winding up Order” against the company, by the court. The creditor company can even go to advertise the petition and thus, alert all the creditors in the market about the company’s inability to meet liabilities.
How Does The Petition Work?
From the announcement or receiving of the petition, there is 7 days’ time for the company to repay the debt. If the creditor goes to the extent of advertising the petition, it will alert the banks and the banks will freeze the company account. In that case, you need to follow strict legal procedures to re-open the frozen bank account, with this guarantee that the account will help in the business transactions and dealings so that the debt can be repaid.
If within 7 days’ time, the debt amount cannot be raised, the court will assign a Licensed Insolvency Practitioner. He will value and sell the assets of the company to recover the amount. The amount will now include the cost of the petitioner, along with the debt amount.
Things To Do:
- Ask for CVA:
A legal adviser of the company will request to adjourn the petition and ask for a Company Voluntary Arrangement or CVA. With this, the company will come to terms with the creditor to ask for a longer period of time to pay the debt.
- Postpone Advertisement:
You can take out an injunction to postpone the advertisement of the petition so that the other creditors do not become alerted, and the bank doesn’t freeze the account.
- Dispute The Petition:
If the petition is false, you can dispute the petition. This is a very serious step as the creditor company will then be charged for the ‘abuse of court process.’ This should be backed up with heavy and serious evidence.
Whatever is the case with you, it is a must that you take professional help of skilled and experienced legal practitioners to prevent this condition. It is never without prior indication that the creditor company can file a petition. Make use of the information and take proper action.