In June 2010, we posted an article explaining how to get winding up petitions dismissed and withdrawn and another, five months later, revealing how HM Revenue and Customs (HMRC) was responsible for issuing the vast majority of winding up petitions in Britain.
Sadly, very little has changed over the past three years and today, HMRC issues approximately 80 per cent of the winding up petitions received by the High Court in London – around 800 every month.
If you are behind on your VAT or PAYE tax returns; HMRC has imposed penalty charges on you; or moved your records from a local office to their collections department, chances are you have probably already been issued with a winding up petition, or soon will be.
In order to consider their options comprehensively, the director(s) must acknowledge the company is insolvent and unable to pay bills as and when they are due.
Nevertheless, a winding up petition from HMRC does not necessarily mean the company will face a compulsory liquidation.
The second article (posted in November 2010), notes how a director who receives a winding up petition from HMRC avoided closing down his business by entering into a Company Voluntary Arrangement (CVA).
In addition to a CVA, there are several available options:
1) The quickest and simplest solution is to pay the petition in full before the hearing date.
2) The director(s) may attempt to save the company by allowing it to go into liquidation, especially if there is nothing worth saving and the company has no value. They can incorporate a new company and continue trading, usually with the assets from the previous company.
3) Another viable option is a pre-pack administration, whereby the company enters into administration so it can be protected from creditors. Then, all the assets are bought back from the administrator and trade starts again, but without the barrier of having to deal with old creditors.
4) Make representation to HMRC and ask for an adjournment of the first hearing date. Providing they receive a substantial payment, usually 50 per cent of the amount owed, the court should agree.
5) Usually, petitions are preceded by a lengthy period of warnings, reminders and notices of proceedings. If you have not done so already, make representation to HMRC for an adjournment to get more time to pay the bill.