Winding-Up Petition: I want to pay but my company doesn’t have sufficient funds

winding-up petition Sep 29, 2019

If you've received a Winding-Up Petition and you want to pay but your company doesn’t have sufficient funds here are the possible outcomes:

Deferred Payments

While the Court will normally adjourn a Petition Hearing to allow for time to make the payment, too many directors run out of time if they need to collect in outstanding debts, sell assets or raise funds.

There are fundamentally only two options for deferring payments when a company doesn’t have sufficient funds:

  • Petitioning Creditor Payment Plan; or
  • Company Voluntary Arrangement

Petitioning Creditor Payment Plan

This involves reaching agreement over payment terms that provide sufficient reassurance for the Petitioning Creditor to support a dismissal of the Winding Up Petition. Such an agreement will not bind other creditors who might want to take over the Petition but if it is agreed before advertising the Petition it can be achieved.

However, HMRC does not agree such plans so this option is not available if they submit or take over a Petition.

Company Voluntary Arrangement (CVA)

This is covered in another section of this website but essentially involves reaching agreement with all the creditors for a CVA which may allow for compromising (writing down) debt. The process of preparing proposals for a CVA and having them approved by creditors can be achieved in 5 – 8 weeks providing everyone involved is committed.

Ideally most of the preparation work can be carried out prior to the first Petition Hearing but if necessary the Court is generally supportive and allows sufficient time for an adjournment. Support for an adjournment may also be required from the Petitioning Creditor, especially if they represent more than 25% of the amount due to unsecured creditors as this is the amount needed to reject a CVA proposal.

One key advantage of a CVA proposal is that it can bind a Petitioning Creditor even though they might reject the CVA proposals. This however can only be done if 75% of the unsecured creditors vote in favour of the CVA which then becomes binding on all unsecured creditors including the Petitioning Creditor.

Approval of a CVA is sufficient grounds for a Winding Up Petition to be dismissed.

For more help on this matter, take a look at the Winding-Up Petitions Guide.

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