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Winding Up Petition

If you’ve been threatened with or have received a winding up petition then this page will help you to understand what you are facing and what your options are:

If you are considering winding up a company that owes you money please read our separate guide by following this link, otherwise please stay on this page.

What is a Winding Up Petition?
  • A Winding Up Petition is a court stamped document that confirms that a Petition for the Compulsory Liquidation of a company has been presented to the relevant court
  • The petition will set out a date for a court hearing for the company to be placed into Compulsory Liquidation
  • If the company is then placed into Compulsory Liquidation the period between the presentation of the petition and the date of the liquidation will be subject to detailed review by the liquidator and any transactions that are not in the general interest of those owed by the company may be legally reversed by the liquidator
Why Would A Winding Up Petition Be Presented?
  • When a money is due from a Limited Company to a third party (individual, business or company)
  • Attempts to get payment from the Limited Company have been unsuccessful
  • A Winding Up Petition will usually, for non HMRC debts, be preceded by a County Court Judgement (CCJ) and a Statutory Petition;  HMRC do not need to follow these steps
When Would A Winding Up Petition Be Needed?
  • When attempts to get payment from the Limited Company have been unsuccessful
  • All other attempts to obtain payment or settlement (a mutually agreed repayment plan) have not been successful
What Happens Following the Presentation of a Winding Up Petition
  • The petition document will have a date noted on it which is the date of the winding up hearing
  • This will take place at the court noted on the petition
  • Without any action by the company that has received the petition, the winding up hearing will place the company into compulsory liquidation
What Are the Options For The Company Once It’s Received a Winding Up Petition
  • Do Nothing
    • The company will be placing into compulsory liquidation at the hearing of the petition on the date set out on the petition
    • The petitioner must advertise prior to the hearing date of the petition
    • It is usually following the advertising of the petition that the company’s bank account will be frozen by the bank
  • Pay the debt listed within the petition
    • Be aware that it is much easier to do this before the petition is advertised as once the company bank account is frozen then a court application to release the funds for payment is usually required
  • Consider an Alternative Solution
    • In the majority of cases if the third party that presented the petition may be willing to accept the company undertaking an alternative insolvency/rescue procedure
What if the Winding Up Petition Has Been Presented by HMRC?
  • It still may not be too late to rescue your business and the company that it operates in
  • HMRC may be willing to consider an alternative solution
  • One of HMRC’s main concerns will be to prevent what is owed from growing and therefore the move to liquidating the company by them is to prevent the company from carrying on trading and potentially increasing the level of money due to HMRC
Who can act as a Company Liquidator?
  • Only Licensed Insolvency Practitioners can be appointed as voluntary company liquidators
  • A Compulsory Winding Up will appoint the Official Receiver as Company Liquidator; though it’s possible that an Insolvency Practitioner may be appointed as the Compulsory Liquidator at a later point or under the court’s instruction

Insider Tips:

Though the role of a liquidator is restricted to those who are qualified and licensed, this restriction does not apply to those giving advice about insolvency, liquidating and rescue. Naturally, we would recommend taking advice from someone that will act as the liquidator of your company and is therefore licensed and will deliver the process as discussed with you.

How Much Will Liquidating a Company Cost & Who Pays?
  • A company will usually pay to liquidate itself from its assets (cash, money owed to it, physical assets etc.)
  • If a company does not have assets to use, then typically company directors and shareholders pay to liquidate the company
  • If a company is forced into liquidating through the courts (compulsory) then a deposit and costs must be paid to the court
  • Liquidating an insolvent or solvent company with will start from £3,000
  • We are happy to consider payment terms for liquidation costs wherever possible
  • Click to learn more; Company Liquidation Costs

Insider Tips:

Look out for unlicensed advisors who will add their costs on to the fees of any liquidator and push the overall cost upwards.

We wouldn’t want to mislead you with eye-catching prices that turn out to be eye-watering bills. We’d rather be upfront about costs; in fact, you’ll be pleased with our prices. In many cases, we can work on a fixed fee basis.

We will quote you on your actual situation and will be glad to offer you a price, that you can take or leave as you wish.

Can I Use Voluntary or Compulsory Liquidation for a UK Company?
  • A compulsory liquidation will usually be started by winding-up petition being sent to court
  • A winding-up petition is sent to court to ask the court to wind-up a company and place it into liquidation
  • The petition will need to be presented along with evidence that a company has not paid money that it is due to pay, and that this is because it is not able to pay – also known as proving insolvency
  • A request to wind-up cannot be sent if the company cannot be shown to be insolvent
  • After the court receives a winding up petition then a date will be set to consider the request for the company to be wound-up – this is known as the hearing date
  • If a company can’t pay what it owes, then compulsory and voluntary liquidation are both choices
  • As a company must be insolvent to enter compulsory liquidation, a compulsory liquidation is not a way of liquidating a solvent company
  • If a company is solvent, then a voluntary liquidation is the correct process

Insider Tips:

A voluntary liquidation does not involve the courts or the government Insolvency Service.

Can I Stop A Company Going into Compulsory Liquidation?
  • If a company is threatened by compulsory liquidation (through the court is the only way to force compulsory liquidation) then fast action is essential
  • A company will need to have received a copy of a winding-up petition before it can be forced to be wound-up through the courts
  • The winding-up petition document will have a date on it of when the court will consider whether a company should be placed into liquidation – known as the hearing date
  • It is possible to ask the court to give more time to allow a company to try to reach agreement with the person that is trying to force liquidation on a company – this is known as adjourning the hearing or an adjournment
  • The next stage of the compulsory liquidation process is likely to be the advertising of the process in the London Gazette – a government publication for legal information
  • Once the advert is placed then a company’s bank is likely to freeze the company’s bank account
  • Once a company’s bank account is frozen the most likely way to allow a payment to be made will through a process known as a validation order, which requires an application to court
  • If a winding-up petition has not been presented, then a company is free to reach agreement with those it owes money to or to consider other rescue or closure options
  • If a winding up petition has been sent in to court against a company, then that company must try to agree payment with the person who is trying to force the company to close
  • If agreement for repayment can’t be achieved, then the court is likely to agree that the company should be liquidated
  • It’s quite common for a person that is trying to wind-up a company compulsorily will consider allowing the company to liquidate through a voluntary route
  • Such a voluntary liquidation will need to take place quickly and before the company is wound up through the courts

Insider Tips:

There is a cost to a person who wishes to force a company into compulsory liquidation. If the person who has presented a winding-up against a company is likely to want to have their costs paid for before they will consider allowing a voluntary liquidation

Will HMRC allow a company to be liquidated through a voluntary route after they have presented a winding-up petition?
  • One of the few choices available to HMRC to collect a debt is to force a company into liquidation through the courts
  • They will make it clear to a company that the winding-up process will begin if payment is not made. This is the best time to consider rescue and closure options
  • Once HMRC has asked the court to liquidate a company – known as presenting a petition to court, then HMRC will have incurred a cost to pay the court
  • Some of HMRC’s costs will be refunded by the court if a company does not go into compulsory liquidation
  • HMRC will consider a request for a company to go into voluntary liquidation even after a petition has been received by the court
  • HMRC will require that their legal costs are refunded
  • Voluntary liquidation may not be the only solution available for the company. All company rescue options should be considered
  • Speed of movement by a company is crucial before the winding up petition is advertised, and the company bank accounts are frozen

Insider Tips:

It’s not uncommon that the reasons that a company fell behind with payments to HMRC have been resolved. Old debts may be able to be repaid from future profits of a company. There are choices to handle this situation.

Does the Government Provide Support for Employees of Insolvent Companies?
  • One huge advantage of working in the UK is the government Redundancy Payments Service
  • The Redundancy Payment Service can make payments to employees of insolvent companies to make up losses of employees who have not been paid because of the insolvency of their employer
  • Insolvency generally means that the employer has entered a formal insolvency process such as Creditors’ Voluntary Liquidation
  • Calculating payments due can be complicated and is specific to an individual’s circumstances; so, we’ll summarise the position
  • Possible claims include:
    • Wages
    • Holiday pay
    • Pay to replace the warning period of redundancy, that should have been given – known as notice pay
    • Redundancy (requires two years employment for that employer)
  • Any payments made by the Redundancy Payment Service will be capped at the statutory maximum levels
  • Statutory levels may be lower than the amount that an employee is due under their employment contract
  • The statutory maximum payment per week, at the time of writing, is £508 per week for anyone made redundant from the 6th April 2018
  • Claim limits are fully detailed on the government website, here’s a link.
  • An Insolvency Practitioner will help employees of insolvent companies to make any claims
  • In certain circumstances, for example where correct procedure was not followed in giving correct notice by an employer, former employees may have a claim for a protective award
  • A protective award must be upheld by the Employment Tribunal Service
  • A successful protective award claim can then be applied for payment by the Redundancy Payment Service
  • We recommend discussing any possible protective award claim with ACAS the Advisory, Conciliation and Arbitration Service

Insider Tips:

Many company directors who are shareholders have moved to pay a part of their salary by way of a dividend. Only salary payments will count towards any claim against the government scheme.

Can I Use My Redundancy Money to Pay for a Voluntary Liquidation?
  • Claims for unpaid amounts can be made by the Redundancy Payments Service if any employer is insolvent and doesn’t pay what’s due.
  • A formal insolvency process is usually needed, such as insolvent company liquidation
  • Claims could be across four areas of payments not made by a company:
    • Wages
    • Holiday pay
    • Pay to replace the warning period of redundancy, that should have been given – known as notice pay
    • Redundancy (requires two years employment for that employer)
  • If an employee is also a shareholder, then it’s possible that some of their payments for working in a company have been dividends and not PAYE salary
  • Claims by an employee will only be made for income paid as PAYE salary
  • Redundancy is only available for employees that have worked for a company for more than two years
  • It’s quite possible that a claim for redundancy could be used to pay for the costs of voluntary liquidation. A formal insolvency is usually needed before a claim can be made
  • Payments from the government usually take around six weeks and possibly longer for payments for a notice pay claim
  • To use redundancy to pay for or to top company money is quite possible
  • An agreement will need to be put in place to guarantee that once payments have been received from the Redundancy Payment Service that they will be paid over the company liquidator

Insider Tips:

Always be clear on what you may be asked to sign by a liquidator. Be clear that what you are agreeing to pay is clear and agreed. An open-ended agreement with no financial cap could be very costly for anyone that signs up to one.

If you have any questions at all, please get in touch. We’d be delighted to help.

Not Sure that Liquidating is the Right Choice?

Review all the options for your company – please click here to understand more.

Got some more questions; please feel free to email or call. Not ready for that why not try our  FAQs?

You could try the .GOV site if you’d like to be sure that our guidance is 100% accurate?

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