Business beware…the Winding Up Petition is back!
BUSINESSES struggling to emerge from the pandemic have a new financial hurdle to overcome…the Winding Up Petition is back.
A Winding Up Petition is a legal action than can be taken by a creditor against any company that owes it money subject to certain limits.
It is a request by the creditor for the court to wind up the company on the basis that the company cannot pay its debts and is often used when other collection methods have failed or have been ignored.
Through the two years of the pandemic, the process was restricted but Sheffield financial expert Deborah Lockwood has warned that the process can now be utilised by creditors as it was pre pandemic.
And that means that even a debt of as little as £750 could set in motion the legal procedure that leads ultimately to liquidation.
“It was inevitable that as the economy emerges from the pandemic the Winding Up Petition would come back into play, as a means of debt recovery, and the thing you have to remember is that you need owe a creditor only £750 and a petition could be issued,” said Deborah, a partner in Sheffield business turnaround and insolvency practice Graywoods.
“During Covid that limit was increased as well as the restrictions around the parameters under which a Winding Up Petition could be issued,” she said.
“Returning the system to its original form will enable companies to pursue debts and therefore to realise money, especially if those debts can be paid by the debtor who has been hiding behind the changes.
“At the same time, of course, there will be companies who are trying their very best to move forward and who are juggling creditors and cash flow who could find that a Winding Up Petition against them is the final straw, especially when other creditors attach to the petition and compound the problem.
“Most creditors will, I hope, continue to work with companies who are demonstrating that they are trying to clear their debts.
“Some companies, though, may well have been using the shield of restrictions on Winding Up Petitions to manage their cash flow, with no intention of resolving their liabilities and they are the ones who really should be worried because the return of the petition will put an incredible pressure on cash flow.
“The sensible thing for both creditors and debtors to do is seek proper advice on the most sensible way forward.
“By acting now, exploring the full range of options and simply talking about it, you might find there is a way to navigate the crisis successfully.”
This was posted in Bdaily's Members' News section by John Highfield .
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