How to Respond to a Winding-up Notice

How to Respond to a Winding-up Notice
Table of Contents

What is a Winding-up Notice?

Winding-up, also known as compulsory liquidation refers to action taken by creditors of the company which (if successful) will result in the company ceasing to trade and being wound down. This is common with companies that struggle to meet their tax obligations or other debts. Once issued, your company has limited time to act to avoid your company being wound up. 

What is a Statutory Demand?

Winding-up notices generally result from failing to comply with a statutory demand. A statutory demand is a formal, written request that a company pays any outstanding debt within 21 days. Failure to respond within 21 days will result in your company presumed to be insolvent. A creditor then may begin court proceedings to have your company wound up.

What Are My Options?

  • Take no action and allow the business to be wound up on the date of the notice. You may decide to continue trading in order to pay the debt off in the required time.
  • Pay the Debt: This whole process will stop if you can pay all the debts owed to the petitioner within seven days, including costs.
  • Enter into voluntary administration: Administrators will work with creditors through a deed of company arrangement, which specifies how the company’s operations will continue. Similarly to paying the debt, this option allows the company to continue operating as long as it can stay solvent.
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Final Thoughts

Remember, a wind-up notice doesn’t have to mean the end. The ATO has stated they are open to the possibility of commercial alternatives even once the wind-up notice has been filed in court. Either way, it’s essential you act quickly when responding to a winding-up notice.

If you have received a wind-up notice, you should obtain legal advice as soon as possible. If you haven’t already done so, speak with one of our expert lawyers today to help guide you through your options.

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