WINDING UP PETITIONS

WINDING-UP PETITIONS :

A CREDITORS GUIDE

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Welcome to Tracenet Legal Services. Since 2015, we have managed and effected the service of Winding-Up Petitions upon debtors across the Country.

We are a multi-award-winning and Industry leading UK Process Server providing Business to Business Litigation, Insolvency & Recovery Support Services directly to UK Debt Recovery professionals and Legal Teams.

If you need assistance in arranging the service of a Winding-Up Petition, please call us on 0800 048 5684 or contact us for a fixed fee, Nationwide service.

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Contents

1. What Is a winding-up Petition?

2. The winding-up petition process
Deadlines and key dates in the winding-up petition process
The importance of early action of company directors

3. Who is eligible to file a winding-up petition?

4. The grounds for filing a winding-up petition

5. Consequences of a winding-up petition

6. How to stop a petition for winding-up

7. What is the average time for a winding-up petition?

Support and Guidance for Professionals

FAQs

Conclusion

WHAT IS A WINDING-UP PETITION?

WHAT IS A WINDING-UP PETITION

The winding-up petition (WUP) allows a creditor to initiate the court process for the liquidation of a company if it has not paid its debts.

The winding-up petition can be filed only if the debtor ignored a Statutory Demand that was served upon the debtor Company at least 21 days previously, or if a judgment has been entered against the debtor by a court.

The case is heard by the court after a winding-up petition has been filed. Both parties are able to present their evidence.

A judge will then make a decision and, if the company is unable to pay its debts, it enters liquidation.

In order to maximize creditor returns, the process of compulsory liquidation involves an official receiver, who is an officer of the Insolvency Service responsible for overseeing the closure of the company and the selling of any assets.

THE WINDING-UP PETITION PROCESS

WINDING-UP PETITION PROCESS

Filing of the petition - A creditor will file a petition to wind up a debt with the court. The petition includes the details and evidence supporting the debt.
Company Response - The company can respond to the petition by disputing or settling the debt. It may also seek legal advice.
Advertisement In The Gazette - The winding up petition must be advertised at least 7 days prior to the court hearing in The Gazette.
Court Hearing and Winding-up Order - If the court grants the winding-up order, the company is forced into liquidation.
The Official Receiver is the person appointed to liquidate the assets of the company and distribute the proceeds to creditors.
Investigating company affairs - The official receiver will investigate the financial affairs of the company, including the conduct and actions of its directors.
Asset liquidation - All assets of the company are sold and the proceeds are distributed in accordance with the law.
Dissolution of a company - The name of the company is removed from Companies House's register.

This brief window of 7 days is often all that directors have after the petition is issued to stop compulsory liquidation. If an alternative solution needs to be found quickly, directors must act. Even at this late date, it is still possible to save a "business" or company, but the longer you wait after the advertising phase, the harder it will be.

DEADLINES AND KEY DATES IN THE WINDING-UP PETITION PROCESS

Deadlines and key dates in the winding up petition process

Directors can act more quickly by knowing the important dates and deadlines for the winding-up petition process. Keep in mind the following deadlines:

21 Days: The period of time between the service of a statutory demand and the filing of a petition for winding up.
7 Days: Minimum period between publication of the petition for winding up in The Gazette, and the court hearing.

THE IMPORTANCE OF EARLY ACTION OF COMPANY DIRECTORS

Directors can act more quickly by knowing the important dates and deadlines for the winding-up petition process. Keep in mind the following deadlines:

21 Days: The period of time between the service of a statutory demand and the filing of a petition for winding up.
7 Days: Minimum period between publication of the petition for winding up in The Gazette, and the court hearing.

WHO IS ELIGIBLE TO FILE A WINDING-UP PETITION?

Creditors - Any creditor in the UK with a debt exceeding £750.00 may file a petition for winding up. This includes lenders, suppliers, and any other business or individual to whom the company is owed money.
The company - A winding up petition can be filed by the company if they wish to dissolve and use their own assets to pay back debts.
Other interested party - In certain circumstances, other parties may be able to file a petition for winding up, including a companies shareholders, a creditor of a company's debt, or an administrative receiver.

THE GROUNDS FOR FILING A WINDING-UP PETITION

A company that cannot pay its debts - Is most likely to file a petition for winding up. If a company cannot pay its own debts of at least £750.00, a creditor may petition the court for winding up.
The company is trading fraudulently - A winding-up petition can be filed in the event that it is suspected that a company is trading fraudulently. This could be through misrepresenting their financial situation or engaging in activities illegally.
No longer in business - A winding-up petition can be filed by a company that hasn't started its business within 12 months of its incorporation or has suspended its operations for a full financial year.
Justifications - The court can deem that it is just and fair to dissolve the company. It may happen when there is a deadlock between the directors or a lack of confidence and trust among shareholders.

CONSEQUENCES OF A WINDING-UP PETITION

The winding-up petition will develop into a winding-up order if the judge deems it valid. A winding-up order can have significant consequences for a company, its directors, shareholders, and employees. The following are some of the more notable effects of a winding up order:

Liquidation - When a winding-up order is issued, a company is liquidated by force and no longer exists. It will not be able to conduct business, enter into contracts or continue to operate.

Directors lose control - When the assets and affairs of a company are wound up, the control is given to an official receiver appointed by the court. The receiver oversees the winding-up process. Directors of the company will then lose control over its affairs, and they will have to work with the official receiver.

Impact on the company's employees - When a business is closed, employees can lose their jobs. They may also be entitled to redundancy payments. The government's Redundancy Payments Service allows employees to claim additional benefits such as unpaid holiday pay and wages.

Impact on shareholders - When a company is wound-up, its remaining assets after its debts are paid, will be distributed to shareholders. It is important to remember that in some cases there may not be enough assets to cover all of the debts of the company, meaning that investors may get little or no return.

Damage to the credit rating and company reputation - A winding-up petition can have a significant impact on the company's reputation and credit rating if they survive.

Investigating directors' conduct - The official receiver will investigate the affairs of the company and report to the court any potential misconduct or wrongdoing on the part of the directors. It can result in the disqualification of directors, or, in extreme cases, directors having to take personal responsibility for any debts that are incurred as a result of wrongful or fraudulent trading.

HOW TO STOP A PETITION FOR WINDING-UP

The speed at which a director acts after receiving a petition to wind up depends on many factors. Directors can take certain actions within seven days after the petition is issued, including:

Negotiate with or Pay off the Creditor - If the company is able to settle the debts or come to an agreement with its creditor, it may be possible for the petition of winding up to be withdrawn.
Apply for an Administration Order - By applying for an Administration Order, the company is able to secure a legal ringfence, which prevents further creditors from taking action and provides an opportunity to restructure the business or save it.
Negotiate a CVA : The CVA ( Company Voluntary Arrangement ) is an agreement between a company and its creditors that allows them to pay back all or part of their debts in a set time period. If the creditors accept the CVA, the winding-up petition can be withdrawn.
Enter Voluntary Liquidation - The company can enter voluntary liquidation depending on the circumstances and timing. This is considered to be a better alternative than compulsory liquidation because it gives directors more control.
Dispute Debt - If the company can prove that the claim of the creditor is wrong and can be challenged, it can contest the winding-up petition in court. Only take this step if you have valid reasons to dispute the debt.

It becomes increasingly difficult to save the company after the seven-day deadline has passed and the petition for winding up has been published. The court will then appoint an Official Receiver for the liquidation.

In general, since the winding-up procedure costs the creditor a great deal of money, they may take a hostile approach. They may even try to appoint a liquidator who will then be very careful to examine your conduct as a director.

WHAT IS THE AVERAGE TIME FOR A WINDING-UP PETITION?

The time required to complete the winding-up process depends on a number of factors including the complexity of a case, the number and type of creditors, as well as the availability of judicial resources. It takes about 10 weeks for a winding-up petition to be issued and the case to go to court.

This is an overview of the various steps and timelines involved in the petitioning process.

The creditor serves the winding-up petition on the company and files it with the court. This usually takes between a few days and a week depending on how well the creditor has prepared for proceedings and the speed at which the court processes the case.
The company has seven days from the date the petition was served to respond and make its case before the court.
A court hearing is scheduled after the petition has been served and advertised. The court may schedule a hearing within a few weeks or a couple of months depending on its availability.
The court will then issue a winding-up order, appoint a receiver and oversee the dissolution of the company. This usually happens within days of the hearing.
Official receivers take control of the assets of the company and sell them to pay debts. The liquidation can last several months, or even years depending on how large the company is, its complexity, and how long it takes to sell the assets.
The official receiver submits to the court a report on the progress made in the winding-up process. This is done once the assets of the company have been sold and the debts paid.

The exact timeframes required to wind up a case will depend on its specific circumstances.

GUIDANCE FOR PROFESSIONALS

We have compiled a list of dos and don'ts for directors who have received a petition to wind-up.

Dos:

Seek insolvency advice immediately. Understanding the impact of the petition for winding up and having a plan to deal with it is essential.
Consider whether the company is likely to survive. Consider alternative options, such as a voluntary arrangement or an administration, if the company can trade its way out of difficulties.
If your intention is to let the winding-up petition go forward unhindered, you should cooperate with the insolvency practitioner who has been appointed to oversee the winding-up process. You should provide all the relevant information to them and follow their instructions.

Don'ts:

Do not try to transfer assets to another company or to a third party in order to avoid the winding-up process. This is illegal, and directors could be held personally liable.
Do not continue trading when the company cannot pay its debts on time. It could lead to further debts and increase the risk of personal liability for its directors.
Do not ignore the winding-up petition or the insolvency procedure. To minimize the impact of the insolvency process on the company, it is crucial to engage and take action.

WINDING-UP PETITION FAQ'S

FAQS

Q1 Who can file a winding-up petition?

A1 Anyone can submit a petition, including creditors, directors of companies, shareholders, or the Secretary of State. Creditors must be owed a minimum of £750.00 to qualify. Other parties, such as directors of companies, may also submit petitions.

Q2 : How long will the winding-up process last?

A2 : It depends on how complex and efficient the liquidation is, as well as the financial situation of the company. The procedure can take months or even years.

Q3 : What happens to company employees in liquidation?

A3 : Employees are usually made redundant in liquidations, but certain entitlements, such as redundancy payments, payment instead of notice, or holiday pay accrued, may be applicable.

Q4 : Can a winding-up petition be withdrawn or dismissed?

A4 : Yes. The petitioner can withdraw a winding-up petition before a Winding Up Order is made, as long as they have received consent or settled their debt. The court may also disallow a petition if the court finds that the company can pay its debts and the petition is presented in bad faith.

Q5 What is the difference between a Winding Up Petition and an Order?

A5 : A winding-up petition is a legal request filed by creditors, or other eligible parties to start the process of liquidating their company. Winding-up Orders issued in response to such petitions officially begin the liquidation process.

Q6 How Does a Winding Up Petition Affect the Directors of a Business?

A6 : Once granted, directors no longer have control over their company's assets or operations. They may be investigated by the official receiver or liquidator for any misbehaviour or breach of fiduciary duty.

Q7 : Can a company continue trading after filing for a winding-up petition?

A7 : Although companies can continue to trade after filing for winding-up petitions, it is not recommended as any transactions that were made following the filing of the petition may be reversed in case they are ultimately wound up.

Q8 : Can a winding-up petition be filed against a sole trader or partnership?

A8 : Unfortunately, no. Winding-up Petitions can only be filed by limited companies. For partnerships and sole traders that require bankruptcy protection a bankruptcy petition is the best option.

Q9 : How is a company disbanded once the winding-up process has been completed and assets have all been liquidated?

A9 : Once all assets are liquidated and distributed, the company's name is struck from the Companies Register.

Q10 : Can a company be restored after being dissolved?

A10 : Companies that have been dissolved may be reinstated on the Companies Register by administrative restoration, or through court orders, depending on their circumstances.

CONCLUSION

Winding-up Petitions form an important part of debt recovery. They allow creditors to recover debts from insolvent businesses by forcing them into liquidation. Legal professionals need to have a thorough understanding of the complex process, as well as all its related legislation and legal requirements in order to advise clients effectively.

Remember -

The threat is real and cannot be ignored. Directors should take action and seek professional advice
Be sure to know your legal obligations in the event of bankruptcy as a director: failing to do so may lead to accusations of fraudulent or wrongful trading
Take note of any actions taken by the company or board after the petition has been issued
Don't pay anyone or sell corporate assets after the petition is issued
Prepare your company's accounts and records before meeting an insolvency practitioner

LINKS

Statutory Demand Guide - https://www.tracenet.co.uk/statutory-demands

Gov.UK - Wind up a Company that owes you money

Gov.UK - Company Voluntary Arrangements

CONCLUSION

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