| By :
Alison Withers
Copyright (c) 2010 Alison Withers A small trading company had ignored HMRC for three years and had not submitted accounts for three years, not since 2007, and in early 2010 HMRC (Her Majesty's Revenue & Customs) served notice for a winding up petition. A director attended the winding up hearing in court unrepresented. He said he was trying to reach agreement with the Revenue and was granted 3 weeks stay of execution. During the three weeks the company sought a firm of business rescue specialists, who, with their experience of turnaround and insolvency, could advise on restructuring options and help develop and implement a rescue plan. They could also help manage the court process. After a business review, the rescue advisers concluded that it was possible to buy some time to allow the company to be restructured. They first recommended that a barrister should represent the company at the adjourned hearing. The barrister successfully sought a six-week adjournment to give time for a rescue plan to be put in place, including proposing a Company Voluntary Arrangement (CVA) for approval at a meeting with creditors. This strategy was accomplished and the petition was dismissed at the third hearing. There are generally two purposes for using winding- up petitions. A legitimate creditor may use them as a final attempt to force the debtor company to respond after previous failed efforts to contact them to try to agree terms of payment for the outstanding liability. They are also used to bully a debtor company into settling an outstanding liability, whether disputed or just to get paid before other creditors. This second reason is often an abuse of process, where the courts are easily deceived. Procedure in court is often key, especially when experienced creditors who know how to play the court 'game' use barristers to deal with innocent directors doing their best to represent the company without expert advice. In themselves winding-up petitions do not mean a company is insolvent but they do indicate underlying issues that have not been dealt with. The issues can include a lack of cash to pay bills on time, being unaware of legal process, or a dispute that has been ignored or spilled over into frustration. The courts are aware of this and tend to be lenient towards directors who ask for time to resolve the petition by granting an adjournment. Their attitude hardens, however, if it is shown at the adjourned hearing that the director has failed to fulfil the undertaking made at the earlier hearing. By promising to pay or agreeing to file returns without being realistic over fundraising or timeframe is where directors trip up. Most of the winding up petitions heard in 2010 have been presented by HMRC. They generally relate to HMRC arrears of PAYE or VAT or failure of a Time to Pay (TTP) arrangement. Like the example in this article, most petitions follow a lengthy period of reminders, warnings and notices of proceedings. The lack of response is aggravated when they haven't received statutory returns and don't know how much they are owed. The resulting petition is based on an assessment that the company is continuing to accrue Revenue arrears. Given the procedural approach by the courts, it is not uncommon that a company is wound up when it could have been saved had they had expert business rescue advice. Those that know court procedures and how best to exploit the system tend to benefit. Unfortunately barristers who know the court procedures rarely have business experience and are unable to recommend realistic remedies for saving the company that can also take advantage of the court process. However, our example shows that a company can be saved despite leaving it very late - to after the first hearing of a winding up petition. Time is needed to find a workable solution for the company and the court process, if used properly, can provide the time needed. It does, however, rely on expert business rescue advisers with both court process and restructuring experience. While it is possible to come to the rescue of a struggling business even at a late stage the advice, nevertheless, is to talk to the HMRC before they file a winding-up petition. Even if you can't pay there are several options for dealing with HMRC liabilities. HMRC are very receptive to deferred payments under a TTP arrangement or a CVA might be appropriate if more drastic restructuring is needed. Either way, business rescue support from advisers with broad business experience, not just insolvency, will help manage the process while at the same time help find a realistic solution. They will work with you as part of the team and in the interests of helping a viable business to survive in difficult times.
|
![[Valid RSS feed]](http://www.articlesbacklink.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
