What is a Winding Up Petition in Scotland?
A Winding Up Petition is a document issued by the courts to a limited company advising that the company will be forced into compulsory liquidation unless they settle their debts.
A Winding Up Petition is an extremely serious matter and if your company is presented with one, you must take action quickly if you want to save your company from closure.
Who can issue a Winding Up Petition in Scotland?
Any creditor to who your company owes at least £750 can issue a Winding Up Petition. The creditor must have reason to believe your company is insolvent which can be established by the following:
- the company not being able to pay its debts as and when they fall due
- the company’s total debts being more than its assets
- the company failing to respond to a Statutory Demand
While any creditor can ask the court to issue a Winding Up Petition, it is often HMRC who go down this route when a company’s tax bills go unpaid.
As a Winding Up Petition is an expensive process, mainly due to the court-involvement required, this is typically only considered an option for a creditor once they have exhausted all other possible avenues to recover the money they are owed.
Before a Winding Up Petition is issued, creditors are likely to have already made numerous efforts to collect the debt through other channels such as reminder letters, emails, and phone calls. A statutory demand may also have been issued which is a formal demand for payment.
What happens after a Winding Up Petition is made?
Once a Winding Up Petition has been issued against your company, time is of the essence. You are able to challenge the Winding Up Petition and have it set aside, however, in Scotland, you only have eight days to do this.
In order to challenge a Winding Up Petition you must have legitimate reasons for doing so. You cannot defend a Winding Up Petition simply because you do not want to pay. Rather, you must have documentary evidence to be able to prove one of the following matters:
- The debt does not exist
- The debt does exist but the amount owed is different to what is being claimed
- The petitioner owes you money which either cancels out the debt you owe them or reduces it below £750
- The Winding Up Petition has not been issued correctly
You can also have the Winding Up Petition revoked by paying the petitioning creditor what you owe or otherwise come to a repayment plan they are happy with.
If you do not lodge a defence or otherwise settle the Winding Up Petition, the court will issue a Winding Up Order which will start the Compulsory Liquidation process.
Once the Winding Up Order has been made, there is nothing that can be done to save the company from closure; therefore, taking action as soon as you receive the Winding Up Petition is crucial.
What happens when a Winding Up Order is made?
Once a Winding Up Order is made the Compulsory Liquidation process will immediately begin.
A licensed insolvency practitioner will be appointed to act as interim liquidator of the company, and it will be their role to identify any assets belonging to the company and ensure that these are sold for the benefit of creditors. They will also be required to investigate the conduct of the directors in the period leading up to the company being issued with the Winding Up Petition.
What should I do if I have been served a Winding Up Petition?
If your company has been issued with a Winding Up Petition, your first step should be to contact a licensed insolvency practitioner. They will be able to help you understand your options and provide the expert help and guidance you need during this time.
If you want to defend the Winding Up Petition, we can help you with presenting the evidence at the court hearing or alternatively talk you through the various insolvency solutions your company could enter as an alternative to being wound up by the courts.
These could include administration, a Company Voluntary Arrangement (CVA), or even voluntarily placing the company into liquidation via a Creditors’ Voluntary Liquidation (CVL).
Remember, when it comes to a Winding Up Petition, time is of the essence. For immediate help and advice from our team of licensed insolvency practitioners, contact Scotland Liquidators today.
