HMRC GETS TOUGH! COMPANIES BEWARE – WINDING UP PETITIONS INCREASE!
There were 5,302 winding up petitions presented in 2012 compared to 3,367 in 2011 by HMRC – an increase of over 57%! In January 2013 alone there were 503 petitions issued.
What is a winding up petition? What are the consequences?
A winding up petition is a court procedure. A creditor can issue a winding up petition if there is a debt overdue for at least £750.
The creditor will usually need the assistance of a solicitor to prepare the petition and the cost is likely to be around £1,500 to £2,000 which will include a court deposit, filing fee and legal fees and is a serious step.
The petition will be served on the Registered Office of the company which is why it is so important that any such post is carefully monitored.
The petition will state a hearing date – likely to be around 6 to 8 weeks from the date of the petition.
If the petition is issued by HMRC it is likely this will be heard by the High Court in London.
The petition will be advertised in the London Gazette after issue – this must be at least 7 days after the service of the petition and 7 days before the hearing.
The company bankers monitor the London Gazette – it is likely that the bank will freeze the bank account once the petition is advertised which will make it very difficult for the company to continue to trade.
If the hearing takes place, without representation it is likely that a Winding Up order will be made against the company and the Official Receiver will be appointed liquidator.
What can be done?
The directors need to seek immediate guidance.
If the debt is disputed, application to the court needs to be made to avoid any advertisement.
If the debt is not disputed it can be paid to avoid further action being taken – providing the petitioning creditor withdraws the petition and no notices have been received in support from other creditors.
If the company is insolvent but potentially viable a CVA (Company Voluntary Arrangement) or Administration procedure could keep the company trading but would need court approval.
The company could enter a Creditor’s voluntary Liquidation, but only with the co-operation of the petitioning creditor. In practice, if this is HMRC they are likely to agree to this procedure providing their costs (around £1,000) are guaranteed by the Practitioner.
A winding up petition is very serious and is a minefield of legal rules – immediate advice should be sought.