The use of winding up petitions as a tool to reclaim money that is owed is increasing at a significant rate. According to figures from Company Watch, which tracks the health of businesses, the number of petition applications has more than doubled in 2023 to 3,488, compared with the same period last year.

As you’d probably expect, HMRC is leading the charge, followed by British Gas Trading.

Between January and August, HMRC submitted winding up petitions to close 1,522 businesses which was an increase of 351 in the same period last year. British Gas Trading has submitted 40 petitions so far this year. If the rate of petitions continues, 2023 will be a record year.

Company Watch has also highlighted increased activity from builders’ merchants Wolseley, HSS Hire, MKM Building Supplies and Edmundson Electrical.

Used as a last resort

Creditors won’t issue winding up petitions unless they have exhausted all other options be get their invoices paid. It costs £2,600 for the petition deposit, plus court fees of £302, as well as the costs involved with drafting and issuing the petition.

Any company in receipt of a winding up petition should respond immediately. If they are able to make payment, do so promptly and request the creditor to withdraw the petition before it is advertised in the London Gazette. Public knowledge of the petition being issued can have additional consequences with other suppliers or finance providers. Alternatively, see if a payment plan could be put in place.

The key is to respond quickly otherwise the petition will likely be granted and the company will be forcibly closed.

Is there a moratorium on the horizon?

During the covid pandemic, a moratorium was put in place to prevent landlords taking legal action to evict tenants who were in arrears as a result. HMRC was also prevented from issuing winding up petitions, which came to an end in March 2022.

There is always the possibility that a moratorium could be put in place if winding up petitions continue to be issued at the current rate, but we’ve not seen or heard anything to suggest that is particularly likely.   

The pressure is on, but help is at hand

Sadly, we don’t have a crystal ball to predict when interest rates will ease and when energy costs will fall back to something less eye-watering. Costs have increased over the last couple of years and any business which hasn’t been able to adjust is either struggling month-to-month or has already made the decision to close.

In our experience, it’s indecision and avoidance which costs company directors the most. There is advice and support out there but only if you choose to engage with it.

We don’t like to see companies close when there could have been an opportunity to turn things around somehow.

Call TruSolv on 0808 196 8676 to discuss what’s going on with your company and how we can help.