If you are a creditor of a company (i.e. a company owes you money) and you have done everything you can to get the company to pay the money it owes, it is possible to get it wound up on the grounds that it can’t pay its debts. Clearly, given the severity of the repercussions, this should only be used as a last resort, but in some circumstances, it is necessary to prevent the company from accruing further debts.
To wind up a company you must force it into compulsory liquidation, which is done by presenting a winding up petition to the court. The court will then hear the petition, and if it agrees that the company should be wound up, it will make a winding up order and the company will be liquidated. The assets of the company will be sold and the money raised will be distributed to the company’s creditors.
A winding up petition is most commonly presented by HMRC, but any creditor owed more than £750 can use a winding up petition to close a company down.However, with the costs of presenting a petition close to £2,000, the amount owing is usually significantly higher.
Ensuring all legal requirements are met
Presenting a winding up petition can be done without any assistance, but to make sure all legal requirements are met it is advisable to get assistance from a professional insolvency specialist. If the winding up petition is not presented properly, costs can be awarded against the person presenting the petition (the ‘petitioner’), so it is essential the forms are completed correctly and used only where there is clear evidence of the debt.
The process for presenting a winding up petition
- The first step is to complete a winding-up petition (Form 4.2) along with an affidavit (statement of truth) verifying the matters that give rise to the petition. You should make three copies of the winding up petition form and send them to the relevant court. If according to the Companies House register, the company has a ‘paid up’ share capital of more than £120,000, the petition should be sent to the High Court. If the company’s paid up share capital is less than £120,000, the forms should be sent to the nearest court (court finder) to the company’s registered office, which can be found on the Companies House register.
- You must also pay the winding up petition fees, made up of a court fee and a petition deposit (to manage the winding up). These fees may be returned if the company can afford to repay them. This payment should be sent to the ‘HM Courts and Tribunals Service’.
- Once the petition has been filed in court, it will fix the place and date when the petition will be heard. You must then serve (deliver) a copy of the petition, which has been sealed by the court, on the company’s registered office. If this is not possible, the petition can be delivered to the company’s last main place of business, or to a company director or company secretary. A copy must also be sent to an insolvency practitioner if the company is undergoing an insolvency procedure.
- The petitioner must then file an affidavit at court verifying that the petition has been served. You will then receive a Certificate of Service from the court.
- No earlier than seven days after the petition has been served on the company, but at least seven days before the hearing date, notice of the petition must be advertised by the petitioner in the London Gazette.
- At least five days before the hearing, the petitioner must file a Certificate of Compliance at the court along with a copy of the notice advertised in the Gazette.
- If the company intends to oppose the petition, it must file an affidavit of opposition not less than five business days before the date of the hearing.
- The petitioner must present the court with a list of all the people appearing at the hearing. This includes those in support of and opposing the petition.
- At the petition hearing, company creditors, directors and shareholders all have the right to be heard. The court may also request to hear from anyone with an interest in the company’s property.
- Once all the evidence has been heard, the court will then decide to:
- Adjourn the petition
- Dismiss the hearing
- Make a winding up order
- Make an interim order
- Make any other order it sees fit
If you’ve received a winding up petition or are being threatened with one, you should seek advice as soon as possible. At AABRS, we have significant experience with dealing with insolvent companies and can advise you about the possible steps that you can take. Call Simon Renshaw on 0208 444 2000 for an initial telephone discussion.