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Going to Court and Winding Up Applications

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.

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