Winner of the Legal 500 - 'Criminal, Fraud & Licensing Law Firm of the Year 2019'
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Winding Up Petitions
Our team of insolvency lawyers is experienced in both the presentation and defence of winding up petitions.
Most winding up petitions are presented by HMRC and we have considerable experience in dealing with such matters.
Whatever your situation our team is here to assist you and provide a no obligation initial consultation to guide you.
What is a Winding Up Petition?
A winding up petition is a document issued by the court against a limited company or a limited liability partnership.
It is usually issued by a creditor against a company where the creditor is owed in excess of £750.
By issuing a winding up petition, the creditor is effectively claiming that the petitioned company cannot pay its debts and that it should be liquidated with any recovered proceeds being distributed to all the creditors of the company.
What are the steps before a Winding Up Petition is Issued?
The most common preliminary steps taken before a winding up petition is issued are:
- Letter Before Action
A formal letter from the creditor to the debtor demanding the payment of the debt and setting out the consequences for the debtor in failing to make such payment.
A formal demand, set out in a prescribed form, for the repayment of an undisputed debt.
In our experience, a Letter Before Action or a Statutory Demand will on many occasions have the desired effect of ensuring that the debt is paid.
If the debtor fails to provide a satisfactory reply to either of the above within the time limit prescribed in each document, the creditor has the option of proceeding to issue a winding up petition.
What is the process for a Winding Up Petition?
In brief, the sequence of events is as follows:
The winding up petition is issued by the court.
The winding up petition is served on the debtor by a process server.
The winding up petition is advertised in the London Gazette.
The petitioner can delay the advertising if meaningful discussions are on-going with the debtor to pay the debt.
Once advertised in the London Gazette, the winding up petition is in the public domain for other potential creditors to see.
The advertisement contains information such as the name and registered address of the company, the details of the petitioner, the date of the court hearing and details of any appointed Solicitor or Insolvency Practitioner.
- Negotiation & Discussion
There is usually a significant gap between the advertising in the London Gazette and the court hearing.
During this period the debtor may look to pay the debt after the petition has been advertised. If the debt is paid the original petitioner may seek to withdraw the petition.
As the petition has been advertised, this may alert other creditors who may wish to join or take over the petition.
- Court Hearing
The winding up petition is either approved, dismissed, withdrawn or adjourned.
- Compulsory Liquidation
If the winding up petition is approved, the Order is served on the company.
The Official Receiver or another Liquidator (Insolvency Practitioner) will be appointed to realise the business and its assets.
An investigation into the company and its directors will be conducted by the Insolvency Service and the Liquidator to ascertain if the inability to pay the debt was due to any wrongful trading, wrongdoing or fraudulent trading by the directors.
The consequences of such an investigation can lead to criminal proceedings for fraudulent trading, director disqualification proceedings and/or personal financial liability for the directors for any debt wrongly incurred.
What are the consequences of a Winding Up Petition?
Once the winding up petition has been advertised in the London Gazette, the consequences for the debtor company are potentially very severe including:
- Company bank accounts being frozen leading to inability to trade,
- Impact on the credit worthiness of the company thereby affecting ability to trade,
- Reputational damage and
- Other creditors joining the winding up petition.
What help can you provide if I have been served with a Winding Up Petition?
We have extensive experience in representing clients oppose winding up petitions, including those presented by HMRC for failure to pay VAT, PAYE and Corporation Tax.
There are a number of ways in which we can assist if you have been served with a winding up petition including:
- Assisting you with the issue of frozen bank accounts
- Dealing with the petitioner and solicitors on your behalf
- Handling negotiations with the petitioner and any other creditors that may have joined the winding up petition following its advertisement
- Present a factual defence by ascertaining if the debt is genuinely disputed and preparing a robust response to the petitioner inviting the withdrawal of the winding up petition
- Present a technical defence by ascertaining if the petitioner has taken all the prescribed steps in both the drafting, service and advertising of the petition and complied with all the prescribed time limits.
If a technical breach is identified, an application for the dismissal of the winding up petition is appropriate.
What are the prospects of recovering the debt by serving a Winding Up Petition?
The issuing of a winding up petition should be a last resort.
We have considerable experience in preparing and issuing winding up petitions. It is a highly technical area and requires the requisite skill and knowledge to ensure our client’s position is protected.
The issuing and service of a winding up petition on the debtor, even before it has been advertised in the London Gazette, can have a sobering effect on the debtor. It often results in payment being made quickly in order to avoid the adverse publicity associated with the advertisement.
However, in circumstances that the company is unable to discharge the debt and raises no genuine dispute concerning the debt, the company will be liquidated. At this stage it becomes uncertain as to whether the original petitioner will recover the full debt owing to it as the debtor company may well have many other unsecured creditors as well as a number of preferential creditors.
For this reason, we look to provide our clients with early and effective advice on the quickest and most cost-effective solution to achieve their stated goal.
Our dispute resolution lawyers are experienced in analysing any situation and providing clear and concise advice to resolve the issue.
Who Can I Contact For Help? | Kangs Insolvency Solicitors
We welcome new enquiries by telephone or email.
Our expert team can advise you in relation to winding up petitions as well as wider insolvency issues.
We are happy to provide an initial no obligation consultation at our offices in London, Birmingham or Manchester or via video conferencing facilities to explore the issues in your case and to provide an assessment of how we can assist you.
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