A winding-up petition is an application filed with a court (usually by a creditor) to request that that a company which owes them money (a debtor) is liquidated by the court. Once a company has been wound-up (or liquidated) then its assets will be taken and sold in order to pay the creditor and usually, the directors of the company will have restrictions placed against them.
Considering the high costs of winding-up a company, if a creditor’s intention is simply to get paid, there may be quicker, easier, and cheaper options available to them. Insolvency is usually seen as a final resort once a creditor has exhausted all other avenues of recovery. Whilst many debtor companies who are presented with a winding-up petition do pay their debts or agree a payment schedule, a creditor should prepare itself that there may be no funds recoverable. The costs of winding-up a company can be in the region of £2,500 for a straightforward application seen through to conclusion.
Before a winding-up petition can be presented to a court, the creditor (subject to limited exceptions) has to serve a statutory demand on the debtor or send them a 21-day letter (this was an alternate set out in coronavirus legislation to give debtors a chance to put forward proposals to pay). Once a statutory demand or 21-day letter has been served and expired, a creditor should carry out checks with the appropriate court for any existing petitions. If no prior petitions exist, a creditor can present its petition to the court.
The court will then seal the petition (effectively ‘issue’ and make it live) and list the matter for a hearing. The creditor must serve the petition on the debtor company, and once seven days have passed since service, it must be advertised in the London Gazette – this gives notice to any other potential creditors of the company. If a debtor cannot raise the funds to satisfy the debt owed under the petition or then they will struggle to convince a court not to wind them up.
If you are owed £750 or over by a debtor and want to begin insolvency proceedings, then Debt-Claims Solicitors are here to help. Our specialist debt recovery lawyers are experts in all things debt-related and will manage the bankruptcy process from start to conclusion.