A creditor who is owed more than £750 by a company can apply to the courts to have it wound up if it can’t (or won’t) pay its debts. This is known as a ‘winding up petition’ and if it is successful, the company can be put into liquidation or ‘wound-up’. Amelia Hardman from Insolvency Solicitors Wright Hassall explains the process:
The process of applying for a ‘winding-up petition’
For a court to grant you a petition, you must complete form 4.2, plus a statement of truth confirming that all details relating to the debt are true, which must then be filed, along with a fee, at either the High Court or alternatively at a court that deals with insolvency cases depending on the amount of paid up share capital owned by the company.
Certificate of compliance
Five days before the hearing of the petition, a certificate of compliance has to be filed in court which confirms compliance with the Insolvency Rules relating to the serving and advertising of the petition:
- Serving the petition
Once the court has issued sealed copies of the petition, it can be served in the following way:
- in person at the debtor company’s premises to a known director, employee or other person authorised to accept the service of documents on behalf of that company;
- it can be left at the registered office in such a way that it will come to the notice of an appropriate person; or
- via a ‘substituted service’ i.e. posted to the last known address of a director of the company (this route requires an application to the court)
- Advertising the petition
The petition must be advertised in the London Gazette, in accordance with set rules, to alert creditors to the company’s financial difficulties. The ad must be placed not less than seven business days after service of the petition on the company. If the company’s bank becomes aware of the petition, they may freeze its account. A copy of the ad must be filed with the certificate of compliance.
Notice of Appearance
Everyone planning to attend the hearing must give the petitioner (or their solicitor) a Notice of Appearance by 16.00 on the business day before the hearing. The notice must indicate whether or not the person giving it is intending to support or oppose the petition and the amount/ nature of the debt. On the day of the hearing, the petitioner must give the court a list of all those who have submitted a Notice of Appearance.
Affidavit in opposition
If the company intends to oppose the petition, its affidavit in opposition must be filed in court not less than seven days before the date fixed for the hearing and a copy sent to the petitioner.
Winding-up order made
The winding up order will then be made at the court hearing after which the official receiver will be appointed liquidator of the company. On the next business day after the order is made, the petitioner, and everyone else who appeared at the hearing, must leave all the required documents to enable the order to be completed, after which three sealed copies will be sent to the official receiver.
The official receiver then serves a sealed copy of the order on the company, by mail, at its registered office or at its last known principal place of business. The order is then advertised in the local papers as chosen by the official receiver, inviting creditors to submit their proof of debt.
Once the winding-up order is granted, the official receiver or liquidator can then start to investigate the affairs of the company and establish why it failed. They have a duty to collect, value and realise all assets and pay creditors and members in a statutory order of priority. The winding-up of the company is effectively the end: the final stage of its dissolution occurs once the funds are distributed to its creditors.