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Pandemic petitions

13 May 2020
What to do if your business is faced with the threat of being wound up

The COVID-19 pandemic has brought a number of new obstacles to businesses navigating through this unprecedented commercial minefield. If you find you are struggling to pay an increasing number of invoices and are receiving demands from suppliers chasing payment of those invoices, you should firstly communicate with them and if possible, seek agree to vary payment terms in writing. 

Unfortunately however, with the economic constraints facing all businesses across every sector, extending credit terms or delaying payments is becoming more and more unattractive to suppliers. Instead, businesses are calling upon more extreme measures to collect in their debts – Winding Up Petitions. These can be issued without any formal demand, for any unpaid debt as low as £750. 

So what do you do if you are served with a Winding Up Petition?

A key weapon in protecting your business from a Winding Up Petition is time. This is required to deal with the claim, but also, and more importantly, to delay the creditor from advertising the Winding Up Petition in the London Gazette for all to see, in particular your employees and your bank. 

Time can be afforded to any company served with a Winding Up Petition by either seeking the agreement of the creditor or obtaining an injunction from the Court. If successful, an injunction stops the creditor from continuing with the winding up process. 

Time is vital for:

a. Providing you with an opportunity to investigate the debt perhaps the debt is in fact disputed? Or has the invoice payment date not yet passed?

b. Allowing you to raise the funds to pay the outstanding sums – consider chasing your own debtors, apply to the various government COVID-19 support grants and loans, or varying other payments due to free up cash to meet an impending Winding Up Petition; and/or

c. Giving you the space to step back and manage the overall commercial picture of your businessas a business owner you will have personnel, clients and other suppliers to also focus on.

How law firms can help you avoid your business being wound up

DWF Law LLP are assisting clients through this time, providing commercial advice on debt claims and giving them the opportunity to have some much needed breathing space. We are defending Winding Up Petitions, successfully securing their withdrawal or dismissal on technical grounds, and avoiding advertisements of the Petition in the London Gazette. In taking care of this legal headache, our clients can return to focusing on what is important for their businesses in the Pandemic.

In summary, in the current national Pandemic, you should seek to communicate with all major creditors to agree varied credit or payment terms. Be proactive in managing your business' debt. Should this not work, and you are served with a Winding Up Petition, you have options and ways in which to navigate this. 

For more advice on commercial disputes and insolvency contact Nikki Hussey and Melena Moore.

Further Reading