If you are a creditor of an insolvent company, you must be owed more than £750 before you can issue a winding up petition and be able to prove that the company cannot pay you.
What is a Winding Up Petition?
A winding up petition is a legal notice issued by a creditor. It has the purpose of forcing an insolvent company into liquidation. The petition is presented to the courts who will establish the insolvency of the company in question. If the courts ascertain that the company is insolvent, they will issue a winding up order, which will lead to the company being liquidated and its assets distributed to its creditors in a set order of priority.
What Else do I Have to do Before I can Issue a Winding Up Petition?
Generally, you will be expected to have tried other means of recovering the unpaid debt, including issuing a statutory demand for the amounts owed or taking legal action against the debtor company.
A winding up petition is the last in a number of options to attempt to recover the debt so should not be seen as a first recourse as soon as an amount becomes outstanding.
How do I Serve the Winding Up Petition?
You will need to fill out the relevant form (Form 4.2) and file it with the courts. When you file the petition with the courts, you will also need to ensure that you provide evidence that the company owes you money. This evidence normally comes in the form of a statutory demand (including the date the demand was served and the amount it relates to) or a court judgment (including the full amount including costs and interest). Finally, you need to accompany these documents with a statement of truth confirming the truth of your petition and the accompanying information.
You must also serve the petition on the debtor company.
If you are planning on serving a winding up petition, you should be aware that there are fees associated with the process. You will need to pay £280 of court fees, as well as include a £1,600 deposit to manage the winding-up. You’ll need to be reasonably confident that you will recoup these amounts in order to make it worthwhile issuing the petition – this is probably unlikely in a situation where the company owed you the minimum £750 threshold for example.
What Happens Next?
The compulsory liquidation process is quite detailed. You can see our full article here. In short, the courts will hold a winding up hearing and, if the petition is successful, will issue a winding up order against the company. The winding up order marks the start of the liquidation of the company. Depending on the level of assets the company has, and your position in the priority of creditors, you may receive some, all or none of the outstanding amounts owed to you.
Want to Talk?
If you are a creditor who is considering issuing a winding up petition against a debtor company, you should seek professional advice. Call for a no-obligation discussion on 0208 444 3400.