A winding up Petition is the start of the process to close a company down because it is unable to pay its debts.
Once a company has been “wound up” by the Court, the company can no longer trade and it is up to the Liquidator to ascertain what assets the company has as these are used to pay off the debts of the company.
Issuing a winding up petition is a drastic and heavy handed way to obtain payment. Winding up can only be used if the debt is not disputed and is over £750.00. Proof has to be given to the court that the debt is not in dispute and this can include an unpaid court judgment or statutory demand.
It is not however unknown for creditors to issue a winding up petition to force payment even if payment is disputed. If this happens then an urgent application for an injunction can be made to the court to stop advertisement of the petition. This is because once the Petition is formally advertised then the bank will immediately freeze the company’s bank accounts thus preventing it from continuing to trade. If served with a petition that relates to an unpaid and disputed debt then it is necessary to urgent legal advice and who can arrange if necessary for the appropriate application to be made to the court.
For more information and initial advice please contact us.