When a company cannot pay its debts to creditors, any or all of the creditors may file a winding-up petition. A winding-up petition, once granted, dissolves the company and liquidates its assets to pay creditors. If a company settles its debts with a creditor, the creditor may withdraw its petition. However, the creditor can only do this if it is more than five days before the hearing regarding the petition and if it has not advertised the petition.
- Skill level:
Get written permission from an officer of your company to settle the debt out of court. The permission letter should include the fact that the company intends to withdraw the petition if settlement is reached.
Accept a settlement payment from the debtor. When you receive payment, notify the debtor in writing that the payment settles the debt and you intend to withdraw your petition.
Apply to the court for permission to withdraw the petition. You will have to stipulate that the petition has not been advertised as well as show documentation for the settlement and intent to withdraw.
Send a letter to the court withdrawing the petition as soon as the court gives permission. Give a copy of the letter to the debtor as proof the petition has been withdrawn.
Tips and warnings
- If you have advertised the petition or received notices supporting or opposing it, you cannot withdraw it.
- You have limited time to withdraw a petition; if you choose to do so, act quickly.
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