Your company has received a Winding Up Petition – what happens next?
A winding-up petition is a document detailing a creditor’s application to Court for an order to “wind up” your Company, forcing it to cease trading. Any creditor can make an application for Court for a Winding-up Order if they are owed more than £750.
You will usually have received a Statutory Demand for repayment before the issuing of the petition, or the creditor will have attempted to execute judgement against you (this would normally mean having gone to Court to obtain a CCJ and sent in bailiffs to recovery goods). Failure to respond to the Statutory Demand within 21 days, or unsatisfied judgement execution in 14 days, often results in a creditor then making an application to Court for a Winding-up Order.
A creditor issues the petition and files it in Court. The Court then endorses the petition and sets a date, time and place for the hearing of the petition. Once this has been listed for a hearing, the petition will be listed on the Court records. This is a matter of public record.
The next step a creditor must take is to serve the petition on you, at the Company’s registered office. You must have received the petition at least 14 days before the hearing of the petition. The document may be delivered to you by hand by a “process server” who may ask you to sign a document confirming that you have received this.
You do not have to be a Director of the Company to acknowledge service of the petition. The petition could come through the post, be attached to the company’s front door or left at the company’s office.
Once the petition has been served on you, the creditor must advertise the petition in the London Gazette. This must be at least 7 days before the hearing of the petition, although some creditors, especially HMRC, advertise the petition earlier than this to ensure that they are compliant with the rules.
If your company shareholding is in excess of £120,000 the petition will be heard in the High Court in London. If it is less it will be heard in a local court in whose jurisdiction covers your company’s registered office.
Once the petition has been advertised you may find a number of things happen: Your bank account is likely to be frozen, even if it is in credit, you will probably find your trade accounts are put on stop and you will most likely be contacted by recovery professionals, trying to sell their advisory services.
There are two main reasons that the Bank will freeze the account. If the account is overdrawn, it is to stop the account becoming further so. If the account is in credit, the Bank stops you from being able to divert Company money, retaining the funds in the account pending the appointment of a Liquidator.
You cannot sell or transfer assets after the issuing of a petition and you should not begin repaying certain creditors in preference to others.
You can ask for the petition to be adjourned to give you additional time to raise funds to pay off the debt or to give you additional time to seek advice on the Company’s financial position. However, it is at the discretion of the judge at the hearing to do so. You do not have to attend the hearing, however, if you are asking for an adjournment legal representation is advisable. A full list of everybody who will be attending should be given to Court by 4:30 pm on the day before the hearing.
In the event that the Winding-up Order is made upon hearing the petition, the Official Receiver is appointed and the Company is in Liquidation. You will be contacted by the Official Receiver. The Official Receiver will need to know details of the Company’s assets and liabilities and will tell you what to do with them. The Official Receiver is likely to request a meeting with the Directors to discuss matters relating to the Company.
It is possible for your business to continue to trade under the control of the Official Receiver, however this depends on the nature of the business and whether continuation of trade will benefit the creditors in any way.
The Official Receiver has a number of functions upon first being appointed. The Winding-up Order must be advertised, lodged with the registrar of Companies and served on the Company. Creditors, Landlords, Banks, Debtors, Directors and Shareholders, Auditors and any Bailiffs will be notified of the appointment and invited to submit claims, and contact the Official Receiver with any information relating to the Company that may be relevant.
The Official Receiver has 12 weeks to decide whether to convene a meeting of creditors of the Company. The meeting would be for the purposes of appointing a Liquidator. Creditors are invited to attend the meeting and can vote for the appointment of a Liquidator of their choice. If the creditors don’t appoint a Liquidator, the Official Receiver may remain in office for the duration of the Liquidation, or an alternative liquidator appointed from the Official Receivers rota. The appointed Liquidator will take steps to realise the Company’s assets and distribute funds to creditors once claims are agreed. The Liquidator will also deal with any employee claims and will report to creditors annually
Throughout the Liquidation, you will have a duty to cooperate with the Liquidator as they seek to do their job. This will include completing a Directors Questionnaire which will assist the Official Receiver in their investigations into the affairs of the Company and in reporting on the Directors conduct.
The above provides a chronology of events from the issuing of a petition. If you have received a Winding-up Petition, it’s a good idea to have a chat with an Insolvency Practitioner to discuss what other options may be available for the Company. It does not mean the immediate end to the Company and there may be other procedures that are appropriate for the Company’s circumstances, both formal solutions and informal negotiations.
If a petition drops through your letterbox, give us a call. Our initial consultation is always free and with no obligation.
Contact Claire Foster, Licensed Insolvency Practitioner on 01302 965485 or by email on firstname.lastname@example.org. Alternatively, you can request a callback using the form on our website.