Winding up applications and going to court
When could you face a winding up application?
Failing to meet payment deadlines and the inability to achieve any sort of
compromise agreement or payment extension deal can eventually lead to your
suppliers or creditors taking legal steps to obtain payment. If they
believe that you are essentially unable to settle the debt, they can opt to
initiate winding up proceedings against you. This is a very serious threat
and should be dealt with immediately, as it can lead to your business being
put into liquidation.
Avoiding winding up proceedings
If you are facing any financial difficulties which could prevent you from
paying invoices on time or sticking to any agreed instalment plan, you
should let the relevant creditors know as soon as possible and seek to
achieve a mutually agreeable compromise. Letting things drag out or
avoiding dealing with disputed payments will cause more difficulties in the
long-run. Putting terms and conditions in place at the beginning of a
business relationship can help to smooth things out when problems do arise.
What if there is a genuine dispute?
If you have not paid a supplier due to faulty goods or sub-standard
services or there is a genuine reason choosing not to settle a debt, as
opposed to not being able to afford to pay, then you can resist a winding
up application. But always make sure that you respond to any statutory
demands without delay, setting out your argument in writing and including
any evidence which backs up your case. It’s unlikely that a creditor will
continue with winding up proceedings if they are not pretty sure you are
unable to pay up, as they can be subject to heavy fines.
Keep your records in order
Being organised when it comes to maintaining documents and records is
extremely valuable, particularly when disputes arise. Having quick access
to relevant Ts & Cs or other evidence can help to stave off any legal
threats and give you some breathing space. Also, if you have a registered
business address which is different to your actual trading address, ensure
that you have a method of being notified of any mail, as legal documents
will be sent to this registered address.
We recommend that if you do wish to initiate winding up a company, you
consider the above carefully and take legal advice about whether and
how to proceed.