Act early to avoid a winding up petition - ReSolve Group UK

Act early to avoid a winding up petition

ReSolve Group UK

Act early to avoid a winding up petition

With the moratorium on winding up petitions coming to an end on 30 June, can we expect an avalanche of petitions come 1 July?   Considering that in 2019 there were 2,945 compulsory liquidations vs 1,352 in 2020 (and in Q1-2021 a paltry 108) thanks to the UK government’s various interventions, it seems very likely. So what should businesses do now to avoid this situation?

When a winding up petition is issued by a creditor, it is trying to force a company into liquidation and this creates many challenges for the companies on the receiving end. From the moment the petition is lodged at court a company’s ability to invest in itself and to continue to trade is curtailed and directors are potentially personally at risk of trading insolvently, amongst other issues.

There is much businesses can do to avoid this insolvency trap. Entering into dialogue with creditors is a good first move, with the intention of delaying liquidation proceedings. Whilst there are some creditors that will take an aggressive stance, most will be forgiving and understanding with business owners who pick up the phone and are honest about the situation they find themselves in. A little communication goes a long way in creating trust and empathy, both of which are required if a debtor is to be patient about back payments.

We urge all business owners who are facing financial distress and the possibility of an imminent winding up petition, to speak to their creditors and give them an update on their financial situation as soon as possible.

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