A Winding Up Petition is the most serious form of action a creditor can take against a company, and will result in the company entering compulsory liquidation on the basis that it is unable to meet its liabilities as and when they fall due, unless the Petition is successfully contested or otherwise dealt with prior to the making of the Order.
The process involves the appointment of a Liquidator who has considerable powers to investigate the company’s affairs and the reasons for its failure, and realise the company’s assets for the benefit of creditors. Initially, the Official Receiver is tasked with overseeing the liquidation, but if circumstances permit an independent third party Liquidator is then appointed, generally by the Secretary of State or, less frequently, by the company’s creditors.
The loss of a customer will not only result in bad debt; if they are a significant customer you have the problem of replacing those lost sales. There might also be an adverse effect on your margins and profits and you might need to reshape your own business as a result.
Compulsory liquidation is generally considered the last resort because all other options have already been exhausted, so once the Order is granted the compulsory liquidation process is established and matters are, in the main, taken out of your hands.
However, it is important to remember that you can proactively take control of the situation and participate in the process by providing important information to the Liquidator, and helping to influence decisions that are made in a way that maximises your prospects of recovery. As a creditor, you are also entitled to make representations to the Official Receiver if you wish for a particular Liquidator to be appointed.
On many occasions insolvency proceedings are initiated and enforced without the debtor being proactive about their predicament, and before they have taken insolvency advice. That is not something you can enforce as the third party creditor, but what we can do on your behalf is approach your customer to establish if alternative options, such as a Company Voluntary Arrangement, are viable which may then give rise to a better recovery to creditors and the possibility of ongoing trade.
There is a very narrow window of opportunity between the advertising of the petition and the making of the Order and therefore the sooner you contact us the better are the prospects of a successful outcome.
Once you have discovered that your customer has received a Winding Up Petition or has otherwise entered compulsory liquidation, contact a member of our team who will be able to assist by:
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