What is a winding-up petition?

A number of clubs have been served winding-up petitions, news which often sends fans into a state of despair over whether their club will fold. But what actually does a petition by Her Majesty’s Revenue & Customs (HMRC) mean?

The current situation Northampton Town find themselves in is a lack of funds to pay back its creditors. Today’s winding-up petition was processed by the taxman (HMRC) for a tax sum outstanding.

A petition is issued to a court where a judge can then advance the petition into a winding-up order. This is where the club’s assets will be seized and liquidated to then repay the instigating party of the petition, something that has happened to the likes of Hereford United and Non-League side Kettering Town.

Before this, HMRC first need to prove that the Cobblers have defaulted on their ability to pay money, an example being that the assets in holding do not meet or exceed the debt sum owed. Another example is a failure to comply with repeated demands for payment.

It goes without saying Northampton are in serious need of funds which, if obtained, could lead to them potentially averting a winding-up order, or at least contesting the order like Portsmouth and Southend United have done in the recent past successfully.

For now, Northampton Town fans must wait to see if the court deems the petition correct in its proof. At which stage the court will issue a date for a hearing to summon all parties.

At this hearing, if the board of Northampton were unable to justify their financial capabilities, the court would issue a winding-up order and an official receiver/administrator will be appointed by the court to sell assets and repay the debt.

What makes things even more detrimental to Northampton is the separate issue of the £10.25m loan repayment due to be paid back to Northampton Borough Council, which, to rub salt into the wounds, is expected by close of play on Thursday.

Together, HMRC and Northampton Borough Council pose a significant dilemma to the Cobblers’ future, and one chairman David Cardoza must deal with.