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What is a Winding-up Petition?
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A winding-up petition is the first step towards obtaining a winding-up order against a business that has substantial unpaid debt. If a winding-up order is subsequently made, it will enter compulsory liquidation, cease trading and the conduct of its directors will be investigated.
What does it mean if one of your customers has a Winding Up Petition issued against it?
If one of your customers has had a winding up petition issued against it, it is because one of its creditors has decided to commence proceedings to recover monies owed to them.
A winding up petition is usually a sign that the customer is not paying its debts as they fall due and is usually implemented as a last resort, having already tried to reclaim monies via a statutory demand or other enforcement action. As such, it is not advisable to permit the customer to extend its liability with you until the winding-up petition has been dealt with by the Court.
If I am owed money by a customer, can I issue a Winding-Up Petition against it?
You can issue a winding-up petition against a corporate customer (“the Debtor”) if:
- at present, there is a debt due of £10,000 or more;
- the debt is undisputed;
- the debt is not due under a business tenancy; and
- you have given the Debtor 21 days’ notice inviting the Debtor to make proposals for payment of the debt and the Debtor has either failed to make any proposals or not made proposals for payment to your satisfaction.
What is the process?
Once the petition has been issued, it will be sealed by the Court and listed for a hearing date, usually around 6 weeks’ time.
Before the hearing of the petition, it has to be served on the Debtor. It is advisable to use a process server to do this to ensure that service has taken place correctly.
Seven days after the sealed petition has been served on the Debtor it can be advertised in the London Gazette. This allows other creditors of the Debtor to see the petition and gives them the opportunity of supporting it.
Once a petition has been advertised, the Debtor’s bank will usually freeze its accounts.
If a winding-up order is made by the Court at the hearing of the petition the Debtor will be deemed to be in liquidation, the business of the Debtor will be automatically closed, the Official Receiver will be appointed as its liquidator and the Debtor’s assets will be realised. Any realisations will be paid proportionally to the Debtor’s unsecured creditors, after the costs of the petition, the liquidator, the liquidation process and possibly the secured creditors have been paid.
What if another creditor has already presented a winding-up petition against the Debtor?
There should only be one winding-up petition issued against the Debtor at any time. However, any creditor of the Debtor can support an existing winding-up petition and, if for any reason the petitioning creditor decides not to proceed with the petition, any other creditor or group of creditors who could have presented a petition can, with the Court’s approval, take over control of the issued petition.
If you require advice please contact Alison Beard, Head of Insolvency, Silverback Law, on 0844 967 2700 or alison.beard@silverbacklaw.co.uk.
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