4R Business Recovery Winding Up Guide

Transcription

1 4R Business Recovery Winding Up Guide 4R Business Recovery Helping You Turnaround Your Business

2 A Few Words From Kevin Here at 4R Business Recovery, we understand that no two businesses are the same. Every day we help companies of all sizes turn things around against seemingly impossible odds. Regardless of your situation, we re here to help. This guide has been put together to help you understand what winding up is and what it could mean to you. If you have any questions about what you see here, and would like to speak to one of our expert advisors, call or Alternatively, if you would like to contact me at I will be happy to answer any of your questions directly. I hope you find the guide useful. Our initial consultations are free and importantly totally confidential. We will work with you to devise an action plan that suits your circumstances. Kindest regards, Kevin Pritchard Managing Director 4R Business Recovery Ltd Key Points to Remember Creditors - People or Companies you owe money to Debtors - People or Companies who owe you money Creditors can take a number of actions to reclaim any money owed to them A statutory demand is a formal and legal request for the money owed This can become a winding up petition if it is left unchallenged A winding up petition asks the court to liquidate your company If successful, this becomes a winding up order and the company has to cease trading Act fast to ensure the situation doesn t get worse Statutory Demands and Winding Up Petitions - Creditor Pressure The process to wind up a company begins with a statutory demand and can often end with the company being liquidated or wound up. This process can be stopped if action is taken early, but if not, the company could be shut down. So what is a statutory demand, winding up petition or winding up order? Sometimes it s easier to bury your head in the sand and ignore mounting debts, but when you do not communicate with creditors, they become worried and as a last resort will start a formal process to get paid. If the debt is not contested but you just cannot afford to pay then the creditor [your supplier or HMRC] can escalate the legal recovery process very quickly by issuing a 21 day Statutory Demand, and then threaten to serve a subsequent winding up petition. Remember it costs very little to issue a Statutory Demand and Creditors often abuse the process to put companies under huge pressure to pay. The problem is assessing if the Statutory Demand is part of a valid recovery process and is going to be followed up with a Winding Up Petition [for example HMRC will always issue a WUP] and for this reason you must take Statutory Demands seriously. We have put together this simple guide to show how you could deal with it. Statutory Demands - The first stage of the process is for the creditor to serve a Statutory Demand on your company. This is a written request asking for the money to be repaid. You must owe the creditor a minimum of and you must respond within 18 days, to either settle the debt or challenge the SD. After 21 days if the debt is not paid or the SD not challenged or a settlement agreed, then the creditor has the ability to start winding up your company by issuing a winding up petition. Winding Up Petitions - If the debt has not been settled within the 21 days, and is over 750, the creditor can issue a winding up petition, asking the court to liquidate your company. This means that your company could be closed and its assets sold off. The proceeds from the sale are then used to settle your companies debts, so the creditor has a chance to recover their money. Winding Up Orders - If the winding up petition is successful it becomes known as a winding up order and your company will go into something called compulsory liquidation. This essentially means the company is closed, and you are removed from control, the companies assets will be sold, so its debts can then be paid.

3 Why You Should Act Early Setting Aside a Statutory Demand - If you don t defend a statutory demand or a winding up petition, you could end up in a situation where you completely lose control of your company. If your business is subject to a compulsory liquidation, your conduct could then be investigated and you could be accused of wrongful trading. Your fiduciary duty as a director changes when company is insolvent and you are required to work in the best interest of creditors. If you have failed to put creditors interests first you could then be subject to investigation and may eventually be subject to a Directors Disqualification Order. Dealing with a Statutory Demand is much easier than defending a Winding Up Petition. The earlier you act the more likely you are to gain a positive outcome. If you feel that you have been served a Statutory Demand that is unfair because of other circumstances or you have a counter claim to submit the courts will allow you 18 days to get it set aside. Other Solutions - This could be for a number of reasons but and would advise you to get professional advice as soon as possible. If you find you are not able to pay your bills on time, you may have a short term cash flow problem, but your company may well be insolvent. In which case, you might consider a Company Voluntary Arrangement, which is a formal insolvency process with creditors and protects you from any legal action. Pre-pack administration and Creditors Voluntary Liquidation may also be appropriate. There are a number of options available to you that will put you back in the driving seat of your business and stabilise its future, contact one of our advisors who will explain the options in more detail. Top Tip All winding up petition have to be published in The London Gazette according to strict timelines, if these are breached then the WUP can be thrown out and dismissed by the court. Telephone 4R for advise about the rules governing publication today and how they can assist you in protecting the business When a petition is published in the London Gazette it results in all company bank accounts are frozen for the benefit of the unsecured creditors. A petition that is published can stop you from trading. Take professional advise now Act fast to ensure the situation doesn t get worse

4 Other Creditor Actions - Statutory demands and winding up petitions aren t the only aggressive actions creditors can take. Others include: County Court Summons. It is cheap and easy to apply for a County Court Summons online and the vast majority of CCJ s awarded by the courts are the result of a failure to follow the strict time line set out by the court process. Many companies end up with a CCJ even when they dispute the debt but have failed to acknowledge service or file a defence in the stated time frame of 14 days and 28 days. This failure results in a Summary Judgement or CCJ by default. County Court Judgements (CCJs). Receiving a CCJ means a court has confirmed you owe the money. If it isn t paid within 30 days, this goes on your record and could affect your companys credit rating. Warrant of Execution. This allows a creditor to send a bailiff or enforcement officer to collect the money or take possession of goods to cover the debt. This is a follow up to a CCJ. Remember not all Bailiffs are created equal! County Court Bailiffs, are different from Private Bailiffs who are different from High Court Enforcement Officers, if you are at risk from a Bailiff visit you need to understand the powers they have, so phone 4R today. Distraint or walking possession. These are two inter changeable terms for the seizure of goods to cover a debt. Walking possession usually involves a bailiff attending the business premises and listing assets of the company and obtaining a signature confirming that assets will remain on the property, these assets will not be removed by the bailiff unless the debtor fails to pay the outstanding debt. This is known as a walking possession order and is the main tool used by Bailiffs and HCEO to enforce a CCJ.

5 What to Do Next Talk to the creditor you may be able to negotiate a solution Arrange a face to face meeting (it is harder to disagree with someone sitting opposite you) Do not get into an e mail war. E mail should be used only to confirm legal positions or agreements do not try and negotiate using e mail, pick up the phone or go and meet the other side in person If possible, pay some or all of the debt, if the debt falls below the minimum requirement there is no cause of action If you re unable to pay, seek professional advice. There are a number of options available to help turn your company around If your business is under threat, contact 4R Business Recovery for an initial consultation completely FREE of charge. We will advise you on what is best for your business. We are here to put your mind at rest and enable you to go forward in a positive frame of mind. Simply call us today on to speak with one of our expert advisors, or contact us through a simple form online via our website. Head Office The Old Vicarage Market Street Castle Donnington Derbyshire DE74 2JB t f e [email protected] w