Winding up petitions are the creditors’ way of forcing the company to liquidate and pay for the amounts owed to them. This happens after they make applications to the High Court who after seeing valid reasons regarding the claim releases an order that permits such forced and compulsory liquidation. In most cases, the creditors will only resort to it after all other means of collection has been ignored or un-provided for by the debtor company.
Winding up petitions are no doubt an entrepreneur’s nightmare. It’s something that poses huge risks and hefty consequences. It is a grave statement of intent from your creditors that signal their exhaustion of all means to debt recovery. In such a situation they believe that the only way available for them to recover what has been owed is by liquidating your business.
What does one do when faced with it then? Read on and find out.
Act as fast as you can. The High Court shall issue the winding up order in only a matter of seven days and after that you can no longer contest its validity or opt out of it. This makes it a must for you to act quickly within the span of those seven days if you want to do away with the forced liquidation. During such span, you can pay the debt in full where possible or if not you can negotiate an arrangement with the creditor (e.g. extend deadline or revise credit rates and terms) or even dispute their claims.
Where you can prove that the business is viable, you may be granted two other options: an administration or a company voluntary arrangement. The two must also be done within the seven days which are apt to be called your “breathing” period.
Administration is where the business is granted to restructure itself. It shall be sold in part or in full and placed under new management. Doing so protects the business against a winding up petition, strengthens going concern and allows time for the entity to recover and eventually provide for payment to its creditors.
A company voluntary arrangement on the other hand allows for an agreement between the debtor company and its creditors where the latter agrees to be repaid some or all of the amounts due them over a specific period of time.
Winding up petitions are no doubt a lethal step on the part of creditors and to battle it out, entrepreneurs must make sure to act fast! Visit http://www.aabrs.com.