Winding-up petitions are applications made to courts to wind up a company (close down a business) and can be made by parties outside the firm, such as creditors, or by the company’s directors themselves.
A winding up petition can only be issued by or to a company, while bankruptcy petitions are issued in the case of insolvent individuals.
After winding up, a company ceases to exist and if it is insolvent at the time, payments to all creditors will not have to be made – Instead each creditor tends to receive a proportion of what they are owed.
Court hearings are arranged for firms facing a winding up petition. Firms that find themselves or put themselves in this situation must seek legal representation to speak on their behalf during the hearing.
It may also be wise for them to seek advise from a debt professional who can provide guidance on paying off creditors. It is possible to stop winding up petitions if business owners act quickly.
For anyone looking to buy a business, keeping abreast of any winding up petitions issued is a good idea as they can act as a great first sign that a business may be heading for insolvency. Firms in this situation can offer great opportunities for investors.
