When a company is insolvent and cannot meet its liabilities, and creditors have exhausted all options to recover monies due, they can petition the Court for the company to be wound up by the Court.
Creditors normally follow this course of action when communication has broken down with the company and frustrations mount.
A statutory demand is normally issued by the creditor, giving the company 21 days to pay, if the debt is not disputed, failing which a petition will be issued for the company to be wound up by the Court (Compulsory Liquidation).
Once a petition is issued against the company by a creditor(s), this renders trade difficult and usually results in the cessation of the business. This is unless the petition is discharged by payment in full, together with the additional legal costs incurred, or is defended if it is disputed.
As a Director, you must take immediate action when a petition is received, if you wish to try and save your business.
Creditors Voluntary Liquidation is still an option as is Administration, or a Company Voluntary Arrangement, if your business is viable, and has recently suffered a bad debt for example, but time is of the essence to maximise options.
If you do nothing as a Director, the Company will be wound up by the Court, and the Official Reciever will be appointed as the Liquidator, who will investigate your conduct as a Director.
It is therefore imperative that if a threat to issue a statutory demand or winding up petition is made or received from a creditor(s), you speak to one of our expert Insolvency Practitioners for advice, on a free, no obligation initial consultation basis.
Dean Nelson, Nicholas Lee, Andrew Stevens and Michael Roome are all licensed in the United Kingdom to act as Insolvency Practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the Insolvency Code of Ethics which can be found here.
When acting as Receivers, Administrative Receivers or Administrators they act as agents only, without personal liability and when acting as Administrators, the affairs, business and property of the company are being managed by them.