Who can issue a winding up petition?

If a winding up petition if issued, this could have a catastrophic effect on a company often resulting in its closure and the investigation of its directors. We investigate who can issue such a petition and if a winding up order might be granted.

If a creditor who is owed more than £750 wants to try and force a company to be closed, they can apply for a winding up petition at the High Court. If the petition is granted, a date for a hearing will be set where the court will decide whether the company should be closed (wound up) or not.

As soon as a winding up petition is issued, the closure process is deemed to have begun. As such the company bank account will be frozen and transactions severely restricted.

Even if the petition is subsequently overturned, this situation will therefore generally have a disastrous effect on the company’s ability to survive into the future.

Does a statutory demand have to be issued?

Any creditor who is owed more than £750 can apply for a winding up petition in an attempt to try and force a company to close. However, in order for the petition to be granted one of three criteria must be satisfied.

• The company must either have failed to satisfy a statutory demand served on it within 18 days.
• Or it must have failed to have paid a county court judgement against it.
• Or it must be proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.

The third criterion is the one used most commonly stated by a creditors.

The question that often arises is how difficult it would be for a creditor to prove that a company is unable to pay its bills.

There is case evidence that the court will grant a winding up petition and subsequently a winding up order on the basis that a company has failed to pay a debt which it has not disputed.

Why petition for winding up?

Based on the third criteria above, it is generally regarded as not difficult for any creditor to argue a case for winding up a company. However, the cost of making the petition may prevent some creditors from acting.

To wind up a company, the petitioning creditor will have to pay court costs of £1000. The cost of solicitors’ advice on top of this would probably also be £500-£1000.

If the court rules that the company is to be wound up, the petitioning creditor is not treated preferentially and will receive a share in any assets realised by the liquidator in the same way as any other creditor.

As such, the reason for a creditor to want a company to be wound up is generally to prevent it from continuing to trade rather than any hope that funds owed might be recovered.

Any creditor who is owed more than £750 and is prepared to spend between £1000 - £2000 can petition for the winding up of a company.

If you have been threatened with a winding up petition or one has already been issued against you, you must take specialist advice from a company insolvency expert as soon as possible.

If you do not act, there is every possibility that a liquidator will be appointed and your company closed.

For more information visit http://coopermatthews.com/winding-up-petition.html

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.

Cooper Matthews specialise in Company Debt Rescue providing straight forward insolvency advice for business owners with business and personal financial problems. They have significant experience in working with small to medium sized businesses, working with Directors, Sole Traders and Self Employed.

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