The current economic headwinds and ever-increasing overheads inevitably squeeze cashflow and can sometimes burden profitable trading companies who have a viable long-term future, with a short-term cashflow problem.

Impatient creditors demanding payment could issue a winding up petition against a debtor company and once issued, the process will ultimately result in a hearing before the Bankruptcy Master in the Bankruptcy Court in Belfast.

We regularly represent Northern Irish companies in the Bankruptcy Court and can make adjournment applications to allow some time for payment to be made to the petitioning creditor so that the winding up petition can then be dismissed.

Businesses should be aware that a creditor’s winding up petition is extremely time sensitive. In the first instance the winding up petition will have a hearing date scheduled and the company will need to be represented at same.

However, less known is that after 7 days from the date the winding up petition is actually served on the company, the petitioning creditor must arrange for the winding up petition to be advertised in the Belfast Gazette. This advertisement notifies third parties that the winding up petition is pending against your company, but more importantly the Belfast Gazette is a publication that is closely monitored by banks and financial institutions and the advertisement of a winding up petition normally prompts banks to immediately freeze the company’s bank accounts. This not only has an impact on the company’s immediate ability to trade, it can also impede the company’s ability to pay the amount due on foot of the petition.

Once frozen, a company’s bank account cannot be unfrozen until the winding up petition has been formally dismissed by the Court, irrespective of the petitioning creditor’s debt being paid prior to the hearing.

We regularly act for companies whose bank accounts have been frozen and who then require an application to be made to the Court to allow the bank account to be unfrozen to enable the petitioning creditor’s debt to be paid, staff to be paid and other necessary payments to be made.

Alternatively, it is not uncommon for the issue of a winding up petition to prompt a company to take stock of its overall financial position and perhaps, despite its best efforts, a company may be simply unable to discharge the amount due on foot of the petition irrespective of being given more time to do so. In such circumstances companies may wish to explore the feasibility of an alternative insolvency process rather than face compulsory liquidation such as voluntary liquidation or administration.

If the directors feel that their business has a long term future if it could just deal with its legacy debt then there is also the possibility of proposing a Company Voluntary Arrangement (CVA) to all of its creditors, including the creditor who presently petitioning for their winding up.

For any of these alternative insolvency processes the company will need to engage an independent insolvency practitioner to advise on the appropriateness of the alternative process and to assist with putting that process in place. We work closely with a large network of insolvency practitioners that we can connect businesses with to explore such options and in the meantime we can represent your company at Court to make an adjournment application to allow you to take insolvency advice from an insolvency practitioner.

If your company has been served with a statutory demand or winding up petition and wishes us to review and advise on how best to deal with same then please contact our Insolvency & Restructuring Team.