The winding up petition procedure begins when the petition is filed with the court. The court will then set a date for a hearing, at which the company can present its case and try to convince the court not to grant the petition.
If the court grants the petition, it will appoint a liquidator to oversee the winding up process. The liquidator will collect the company’s assets, sell them, and use the proceeds to pay off the company’s debts.
Any remaining assets will be distributed to the company’s shareholders. The winding up petition procedure can be a lengthy and complicated process, and it is important for companies facing this situation to seek legal advice.
What is the procedure for presenting a winding-up petition
The process for presenting a winding up petition begins when the creditor files the petition with the court and serves it on the company.
- Complete a winding up petition (Form 4.2) along with an affidavit (statement of truth)
- Make three copies of the petition form and send to the relevant court (High Court if paid up share capital £120,000, nearest court to registered office if paid up share capital £120,000)
- Pay winding up petition fees to HM Courts and Tribunals Service
- File petition in court, which will set a date and place for the hearing
- Serve a copy of the petition (sealed by the court) on the company’s registered office, last main place of business, or a company director or secretary
- File an affidavit verifying that the petition has been served, and receive a Certificate of Service from the court
- Advertise notice of the petition in the London Gazette at least 7 days before the hearing, but no earlier than 7 days after the petition has been served on the company
- File a Certificate of Compliance and copy of the Gazette notice at least 5 days before the hearing
- File an affidavit of opposition if the company intends to oppose the petition, at least 5 business days before the hearing date
- Present the court with a list of all attendees at the hearing
- At the hearing, creditors, directors, shareholders, and anyone with an interest in the company’s property have the right to be heard
- The court will make a decision to adjourn the petition, dismiss the hearing, make a winding up order, make an interim order, or make any other order it sees fit
It’s worth noting that this is a general overview, and the winding up process can vary depending on the specific circumstances of the case. It’s important for companies facing winding up petitions to seek professional legal and financial advice to understand their options and navigate the process effectively.
When a winding up petition is granted by the court, the court takes on a central role in the winding up process. The court will appoint an Official Receiver or liquidator to oversee the winding up process and ensure that the company’s assets are sold and its debts paid off. The Official Receiver or liquidator acts as an officer of the court, and is responsible for conducting an investigation into the company’s affairs to determine the causes of its insolvency.
This investigation may include interviewing directors and other relevant parties, reviewing financial statements and other documents, and taking any other steps necessary to establish the facts.
The court also has the power to make decisions on a range of issues related to the winding up process. For example, the court may decide whether to grant permission for the company to continue trading during the winding up process, or whether to make an order to liquidate the company.
The court may also decide on disputes between the company and its creditors, or between different creditors. Overall, the court plays a crucial role in ensuring that the winding up process is conducted fairly and efficiently, and that the interests of the company’s creditors and other stakeholders are protected.
Three examples of the types of debts that may lead to winding up petitions:
- Unpaid taxes: Companies that fail to pay their taxes, such as VAT, PAYE, or corporation tax, may be at risk of receiving a winding up petition from HMRC. This is because HMRC is considered a preferential creditor, meaning that it has a higher priority for repayment than other creditors in the event of insolvency.
- Unpaid supplier invoices: Companies that fail to pay their suppliers for goods or services may also face winding up petitions from those suppliers. This can be especially problematic for small businesses that rely heavily on a few key suppliers, as the loss of those suppliers could severely impact their ability to operate.
- Unpaid rent: Companies that rent commercial premises may face winding up petitions from their landlords if they fail to pay their rent. This can be a particular issue during times of economic hardship, such as the COVID-19 pandemic, when many businesses have struggled to pay their bills and keep up with their financial obligations
Ensuring all legal requirements are met
To ensure that all legal requirements are met, it is recommended to seek the help of a professional insolvency specialist when presenting a winding up petition. If the petition is not properly presented, the petitioner may be ordered to pay costs. Therefore, it is important to ensure that the forms are completed accurately and that there is clear evidence of the debt.
Read more:
- Getting a winding up Petition be dismissed
- Winding Up Petition Procedure
- Received a winding up petition from HMRC
- Difference between a statutory demand and a winding up petition
- Winding up Petition Hearing Representation
- Withdrawing a Winding-up Petition
Conclusion
The winding up petition procedure, in sum, is a legal approach that allows a creditor to recoup a debt from a corporation by gathering and selling the firm’s assets. The petition is filed with the court and served on the company, and the procedure is complete once the company’s obligations have been settled and any leftover assets have been distributed to the shareholders.
The process might be complicated, therefore it’s crucial for businesses facing this position to consult with legal counsel. In order to avoid any potential fees or other penalties, it is also crucial for the creditor to properly deliver the petition.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.