The prospect of a winding-up order from a UK Court is serious business. It’s such serious business that it can seriously ruin your business.
First things first… What are they? Well, winding-up orders are court orders served to an organisation that sees an Official Receiver (sometimes known as an ‘OR’) appointed to begin liquidating the company. This happens in order to sell off assets and pay creditors. Usually the creditor will be someone such as Her Majesty’s Revenue & Customs. A High Court Judgement is obtained or a Statutory Demand served on the business and - provided the debt is £750 or more - if it isn’t paid within 21 days, a Winding-up Petition is then served which in turn allows the Court to issue a Winding up Order .
This exact scenario almost played out at one of Britain’s most famous and well-supported football clubs recently. Sport franchises are known for simultaneously high turnover and low - sometimes even entirely non-existent - profits. As such they’re often playthings for millionaires or billionaires. Money is often pumped in freely, but when the owners get bored or sell up, trouble often isn’t far away...
Many great football clubs constantly reside on something of a financial precipice. Just ask any fans of Blackburn Rovers, Charlton Athletic, Blackpool, Birmingham City, QPR, Coventry City… The list goes on.
The latest club to find themselves is really rather serious trouble are Midlands outfit Aston Villa. A former Premier League stalwart that would pack in more than 40,000 supporters into Villa Park every other week, the Villains found themselves in trouble after HMRC threatened to serve them with a winding-up order recently for unpaid tax.
Villa are not alone. The 1982 European Cup winners join a long list of clubs that have faced the prospect of winding-up petitions in the past six years, including:
- Bolton Wanderers
- Nottingham Forest
- Ipswich Town
- Leeds United
- Oldham Athletic
- Southend United
- Swindon Town
- Port Vale
- Leyton Orient
- Hartlepool United
- Notts County
- Mansfield Town
- Accrington Stanley
- Wycombe Wanderers
- Northampton Town
- Carlisle United
Villa need to raise some £40m in order to comply with The Football Association's rules on Financial Fair Play following last season's failure to secure promotion back to the Premier League (they lost the Play-Off Final, consigning them to another season in the pyramid’s second tier, The Championship).
Thankfully for the club and its supporters, the winding-up order is now off the table after the club agreed to enter into a payment schedule with HMRC. But they will now need to drastically reduce their wage bill and sell some of their prized playing assets to raise funds.
What happens if you’re served a winding-up petition or order?
First of all, you’ll be given a winding-up petition. A demand to settle debts. You need to take it seriously. These things aren’t dished out like confetti. And they can mean the very real and very imminent end to your business. That’s not to say that you should panic, though. You can still save your company.
If it’s an actual winding-up order, though? Well, that’s another matter. If you’ve ignored the problems and the winding-up petition and you’re actually at the order stage then we’re afraid your business is getting liquidated. You’ve reached the point of no return.
Winding-up orders can be stopped. Provided you do what you need to do in time and abide by the rules, they’re fully avoidable. From the date of the original petition to wind up the insolvent company there is a seven day window in which you must do one of the following things to stop the winding-up order being served:
- Pay all outstanding debts owed to the petitioner in full.
- Come up with and agree upon a payment plan with them (a Company Voluntary Agreement).
- Apply for an Administration Order. This is voluntarily placing your company into administration while the process happens. You’ll need to appoint an Insolvency Practitioner as administrator and some assets may need to be sold to cover any outstanding debts.
- Completely dispute the order and declare that you believe the claim to be inaccurate or unfair to the High Court.
It is highly likely that the second option makes the most sense here. Option one requires you to have the full amount owed lying around somewhere. Option three could work for you if money is so tight that future funds look unlikely. The final option is only for extreme cases.
If you’ve received a winding-up order or you feel like your business debts are mounting up and one may well be heading your way, contact us immediately. We can - and will - help if you let us.