When a company is insolvent and cannot meet its liabilities, and creditors have exhausted all options to recover monies due, they can petition the court for the company to be wound up by the court.
Creditors normally follow this course of action when communication has broken down with the company and frustrations have mounted.
A statutory demand is normally issued by the creditor, giving the company 21 days to pay if the debt is not disputed, failing which a petition will be issued for the company to be wound up by the court (compulsory liquidation).
Once a petition is issued against the company by a creditor or creditors, this renders trade difficult and usually results in the cessation of the business. This is unless the petition is discharged by payment in full, together with the additional legal costs incurred, or is successfully defended if it is disputed.
As a director, you must take immediate action when a petition is received if you wish to try to save your business.
If you do nothing as a director, the company will be wound up by the court, and the official receiver will be appointed as the liquidator and will investigate your conduct as an office holder.
Therefore, if a threat to issue a statutory demand or winding-up petition is made or received from a creditor or creditors, it is imperative that you speak to one of our expert insolvency practitioners for advice on a free, no-obligation initial consultation basis.
Dean Nelson, Nicholas Lee, Andrew Stevens and Michael Roome are all licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the insolvency code of ethics, which can be found here.
When acting as receivers, administrative receivers or administrators, they act as agents only, without personal liability, and when acting as administrators, the affairs, business and property of the company are being managed by them.