Winding-up Petition

What is a Winding-up Petition?

A “Petition” is a legal term for an application to a court for an order to be made. Hence a winding up petition is an application to the High Court, or a county court with the appropriate jurisdiction, which may order the winding-up of a company. This may be, for example, on the petition of a creditor or creditors on the grounds that the company cannot pay its debts.

A company is regarded as unable to pay its debts if, for example, a creditor:

  • is owed more than £750
  • presents a written demand in the prescribed form (known as a statutory demand) to the company; and
  • the company fails to pay, secure or agree a settlement of the debt to the creditor’s reasonable satisfaction.

The court may also order the company to be wound up on the petition of:

  • the company itself;
  • the company’s directors or one or more members;
  • the Secretary of State for Business Enterprise and Regulatory Reform;
  • the Financial Services Authority (formerly the Securities and Investment Board);
  • the Official Receiver

Unless the court directs other arrangements, the petition must be advertised in the London Gazette. Once the petition has been advertised, the company will have its bank account automatically frozen by its bank. Once the petition has been advertised, it cannot be withdrawn.

If the court grants the petition and makes the winding up order, the company is placed into Compulsory Liquidation, at which point the Official Receiver is appointed the Liquidator.

The Official Receiver has a duty to investigate the company’s affairs, the conduct of the directors, and the causes of its failure.

The Director’s of the company are required to complete a detailed questionnaire as to the affairs of the company and will be interviewed by the Official Receiver with regard to their management of the company and their responsibility for the failure of the company.

He also decides whether to call meetings of the creditors and contributories (that is, those people liable to contribute to the assets of the company if it is wound up) for the purpose of appointing a liquidator in his place. 

If he decides not to call meetings, he must notify the creditors, contributories and the court of his decision.

On the other hand, if he decides to call meetings, an Insolvency Practitioner may then be appointed as Liquidator in place of the Official Receiver. The liquidator must notify the Registrar of his or her appointment immediately. 

If the position of liquidator becomes vacant at any time, the Official Receiver becomes the liquidator for the duration of the vacancy. 

When the Registrar receives notice from the liquidator of the final meeting of creditors or notice from the Official Receiver that winding-up is complete, the Registrar will register it and publish its receipt in the Gazette. Unless the Secretary of State directs otherwise, the company will be dissolved 3 months after the notice was registered at Companies House.

If the Official Receiver, acting as liquidator, is satisfied that the company’s realisable assets (that is, assets which could be sold or disposed of to raise money) will not cover the expenses of winding-up and that no further investigation of the company’s affairs is necessary, he may apply to the Registrar for early dissolution of the company. The company will be dissolved 3 months after the application is registered at Companies House.

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