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Dealing
with Debt - How to Wind up a Company that owes you Money
URN06-1057
About this publication
This publication:
- answers the questions you are most
likely to ask about winding up a company that owes you money;
- gives general information on how to
wind up a company in the court - that is, to put a company into
compulsory liquidation;
- explains what happens after the
company goes into liquidation;
- is only a guide. Please do not rely on
it instead of seeking your own legal or financial advice.
You may also find it useful to refer to
the relevant legislation in the Insolvency Act 1986, the Insolvency
Rules 1986, Council Regulations (EC) No. 1346/2000 ('the EC Regulation')
and the Companies Act 1985.
If you are a director or shareholder of a company that you want to put
into liquidation, you should refer to our publication "Dealing with
debt - How to wind up your own company".
Before you take any action, you should obtain your own legal or
financial advice.
All the forms referred to in this publication are taken from the
Insolvency Rules 1986, as amended. The forms you require are available
from The Insolvency Service website at http://www.insolvency.gov.uk
or from any legal stationer.
You will find an explanation at the back of this publication for some of
the terms used.
What is compulsory winding-up?
Compulsory winding-up is a legal process by which a liquidator is
appointed by order of the court to 'wind up' the affairs of a limited
company. At the end of the process the company ceases to exist. Winding
up does not mean that the creditors of the company will necessarily get
paid. The purpose of winding up a company is to ensure that all the
company's affairs have been dealt with properly.
This involves:
- ensuring all company contracts
(including employee contracts) are completed, transferred or
otherwise brought to an end;
- ceasing the company's business;
- settling any legal disputes;
- selling any assets;
- collecting in money owed to the
company; and
- distributing any funds to creditors
and returning share capital to the shareholders (any surplus after
repayment of all debts and share capital can be distributed to
shareholders).
When these things have been done the
liquidator applies to have the company removed from the register at
Companies House and dissolved, which means the company ceases to exist.
Where can I get advice about winding up a company?
Before you take any action to put a company into liquidation, you should
obtain our own legal or financial advice about this procedure and any
other options available to you. You can get advice from your local
Citizens Advice Bureau, a solicitor, a qualified accountant, an
authorised insolvency practitioner, any reputable financial adviser or a
debt advice centre.
How do I wind up a company?
If a company owes you money and has refused or neglected to pay the
debt, you may apply to wind it up by presenting a petition to court for
that purpose. A winding-up petition is usually presented by a creditor
on the grounds that the company cannot pay its debts and this has to be
proved to the court.
How do I prove to the court that the company cannot pay its debts?
The court will regard a company as being unable to pay its debts if any
of the following occurs:
- A creditor who is owed more than £750
serves a 'statutory demand' (Form 4.1) for the money due and it is
not paid or secured, or a settlement is not agreed, within 21 days.
You can get the form for a statutory demand from your local court or
from The Insolvency Service's web site at www.insolvency.gov.uk.
The completed form must be served on the company at its
registered office. The creditor must have proof of service, so it is
usual to employ a process server (these are listed in Yellow Pages
under 'detective agencies'). The court is not involved in issuing
statutory demands, so no court fee is payable. However, the company
can dispute the statutory demand and apply to court for an order
restraining the creditor from presenting a winding up
petition.
- A creditor obtains judgment against
the company and execution is unsatisfied; in other words the sheriff
or bailiff is unable to seize enough assets to clear the debt. You
can get the forms to issue a claim for judgment from your local
court or from the Court Service website at www.hmcourts-service.gov.uk.
- It is proved to the court that the
company cannot pay its debts when they fall due; for example, no
payment is made in response to a letter of demand.
- It is proved to the court that the
company's total debts exceed its total assets.
In which court should a winding-up
petition be presented?
The winding-up petition may be presented in:
the High Court,
Royal Courts of Justice
Companies Court
TM 2.09
Strand
London WC2A 2LL
Tel. 020 7947 6294
Open 10.00am to 4.00pm Monday to Friday (except August - closes at
2.30pm)
any District Registry of the High Court -
Leeds 0113 306 2800
Liverpool 0151 473 7373
Birmingham 0121 681 4441
Manchester 0161 954 1800
Preston 01772 844700
Newcastle upon Tyne 0191 201 2000
Cardiff 029 2037 6400
Bristol 0117 9106700
in a County Court where all of the
following are true;
- the County Court deals with insolvency
matters; and
- the County Court covers the area where
the company's trading address or registered office is situated;
and
- the paid-up share capital of the
company is £120,000 or less.
What is the procedure for presenting a
winding-up petition?
To ensure that all legal requirements are met, you usually need to
instruct a solicitor to deal with issuing a winding-up petition. The
winding up process is not simply a matter of completing a petition and
presenting it to the court. A court hearing can result in costs being
awarded against either party. For example, costs may be awarded against
you if the court believes you have used the winding up procedure
inappropriately where the company has good reason for saying it does not
owe the money.
The procedure in detail is as follows:
Completing the petition and verifying
As the petitioner, you must complete a winding-up petition (form 4.2)
along with a witness statement or affidavit confirming the statements in
the petition are true. Notes on form 4.2 will guide you. In addition,
you should note the following:
Completing the winding-up petition (form 4.2)
Paragraphs 1 to 4
You will need to make a search at Companies House, at 21 Bloomsbury
Street, London WC1B 3XD in person or by telephone on 0870 3333 636 or
on-line at www.companieshouse.gov.uk,
to get the necessary details about the company.
Paragraph 5
You must state the grounds for winding up. This will typically mean
including details of the debt.
• If you asked for the money by letter you will need to state what the
debt is for, the amount
you demanded in the letter and the date of the letter.
• If you asked for the money by sending an unpaid invoice, you will
need to state what the debt
is for, the amount you demanded in the invoice and the date of the
invoice.
• If you have obtained a judgment, you will need to state the amount
of the judgment plus the
costs obtained and any further interest claimed, the date of the
judgment, the court where the
judgment was obtained and the case number.
• If you asked for the money by making a statutory demand (form 4.1),
you will need to state
the amount you demanded, the date it was served on the registered
office, and that at least 3
weeks have passed since it was served. In this case the debt must be
£750 or more.
In all cases you should state that the company has not paid the debt, or
a specified part of it, and that you believe the company is insolvent
and unable to pay its debts.
If the company has been dissolved, you should also state this and the
date that the company was struck off.
Paragraph 7
You need to state whether the EC Regulation on Insolvency Proceedings
2000 does or does not apply. If the EC Regulation does apply, you need
to state whether the proceedings will be 'main', 'secondary' or
'territorial'. If the company is registered in England and Wales and
mainly carries out business in England and Wales, the EC Regulation will
apply and the proceedings will be main proceedings. In other
circumstances you should seek more advice.
Paragraph 8
If the company has been dissolved you will need to ask the court to
restore the company to the Register of Companies before making the
winding-up order. To do this you add an extra clause to the ‘prayer’,
saying that the company name should be restored to the register. You
will need to obtain the consent of the Registrar of Companies and The
Treasury Solicitor (BV) to the
restoration. Further information on the restoration of companies is
available from The Treasury Solicitor's web-site at http://www.bonavacantia.gov.uk/
Issuing the petition
The petitioner should prepare:
- the original petition;
- 3 copies of the petition (4 if the
company has been dissolved)
- the original affidavit/witness
statement;
- a cheque payable to 'H.M.C.S.’ for
£860. This amount includes the court fee to issue the petition of
£190 plus the official receiver's deposit of £690;
- if you are attending the court in
person, rather than posting your documents and fee, you will also
have to pay a search fee of £5 in Companies Court in London.
Serving the petition
The petition must be served at the address shown at Companies House as
being the registered office of the company. You can serve the petition
at the registered office in any of the following ways:
- hand the petition to a person who
there and then acknowledges himself to be director or other officer
or employee of the company or to be authorised to accept service on
behalf of the company;
- hand the petition to a person who, to
the best of the server's knowledge, is a director or other officer
or employee of the company;
- if there is no such person at the
registered office, then the following methods of service are also
considered acceptable:
- placing the petition in the letter
box
- placing the petition on a table,
desk, chair, the floor or a radiator
- placing the petition on the
receptionist’s desk
- fixing the petition securely to
the front door (the server must state in the affidavit/witness
statement of service the method by which the petition was
fixed).
It is usual to employ a process server
(these are listed in Yellow Pages under 'detective agencies') to serve
the petition. If for any reason you are unable to serve the petition in
any of the above ways, you must apply to the court for leave to serve by
some other means, for example by post on a director at his last-known
address. Court staff will advise you how to make such an application.
If the company has been dissolved the additional copy of the petition
should be served on the Treasury Solicitor for his consent to be
obtained.
After serving the petition - what next?
Immediately after the petition has been
served you must file an affidavit/witness statement of service with the
court (form 4.4, or use form 4.5 if you were unable to serve the
petition at the registered office). The affidavit/witness statement
should state how you served the petition. If you were unable to serve at
the registered office, you should state why. A copy of the petition must
be attached to this affidavit/witness statement and then the
affidavit/witness statement should be filed at court at least 5 business
days before the hearing.
If you are aware that the company is in
voluntary liquidation, in administrative receivership or is the subject
of an administration order or a voluntary arrangement then, on the next
working day after service of the petition on the company, you must send
a copy of the petition to the liquidator, administrative receiver,
administrator or supervisor as the case may be.
You must advertise the petition in the
London Gazette (0800 600 3322) or www.gazettes-online.co.uk
no sooner than 7 business days after the petition was served and no
later than 7 business days before the winding up hearing. The
advertisement (form 4.6) must show the date of the petition hearing and
your name and address inviting others to contact you if they wish to
support or oppose the petition.
You must file a certificate of compliance
(form 4.7) with the court at least 5 business days before the hearing.
You must attach a photocopy of the full page of the London Gazette
containing your advertisement to the certificate of compliance. You will
need to file the list of persons intending to appear at the hearing
(form 4.10) with the court by 4.30pm on the day before the hearing (some
courts allow this to be handed to court staff in court before the start
of the hearings). You should complete this list based on any
notifications you have received (form 4.9).
Can I withdraw my petition?
You may wish to withdraw your petition, for example if the company pays
the debt. Court staff will inform you of the appropriate procedure,
which will depend on the stage that your petition has reached.
What happens at the hearing?
The procedure for the hearing is likely to differ depending on the court
in which you apply for a winding-up order. Set out below is the
procedure for the High Court. Court staff in Companies Court cannot
advise you about the procedures in other courts. You should get
procedural information get this from the court at which you intend to
apply.
The hearings take place before a Registrar (or in the County Court a
District Judge) on the date endorsed on the petition. If you are an
individual creditor, you may appear in person or instruct an advocate
(solicitor or barrister) to represent you. If you are a company
creditor, then you may, with the permission of the court, be represented
by an employee authorised to appear on behalf of the company or instruct
an advocate to represent the company.
Your petition will be one of many petitions heard on the same date. Not
all petitions are heard at the time endorsed on the petition (10.30am).
The list of hearings is divided up into half-hour time slots. Call 020
7947 6102 on the day before the hearing to be told of the time slot for
your petition. This will be 'not before 10.30am', 'not before 11.30am'
etc. You should be in the court room before the start of the time slot.
The court staff will also tell you which court room your petition will
be heard in.
At the time your petition is called in the court room, you may:
- ask the Registrar to make a winding-up
order if your papers are in order; or
- ask the Registrar to dismiss the
petition - if, for example, the debt has been paid or you have
reached an agreement with the company; or
- ask the Registrar to adjourn the
hearing if you have been unable to complete the documentation in
accordance with the rules or if you are still negotiating with the
company (the Registrar will usually only adjourn a petition once to
allow for negotiation).
The Registrar will then make an order as he or she sees fit.
Can the winding up of a company be
stopped once the winding-up order has been made?
The winding-up procedure can be stayed or rescinded even after the
winding-up order has been made. Court staff will inform you of the
correct procedure.
What happens after the winding-up order is made?
Usually, the official receiver (who is both a civil servant employed in
The Insolvency Service and an officer of the court) will be appointed
liquidator of the company on the making of a winding-up order. The
official receiver has a duty:
as official receiver
(a) to ensure that notice of the winding-up order is advertised in the
London Gazette and in a local newspaper; and
(b) to investigate the affairs of the company and to establish the cause
of its failure (by obtaining information from the directors of the
company and from third parties, such as the company's bankers,
accountants and solicitors);
as liquidator – to collect and realise all assets and pay all
creditors.
The official receiver may call a meeting of creditors to appoint an
insolvency practitioner as liquidator in his or her place, but if this
happens, he or she still has a duty to investigate the company's
affairs. So, two people may be involved in the liquidation:
• the liquidator, who is responsible for collecting and realising the
assets and paying the creditors; and
• the official receiver, who investigates the company's affairs.
The official receiver also has a duty to make a report to the Secretary
of State, under the Company Directors Disqualification Act 1986,
regarding the conduct of the company's directors.
What are the duties of a company
director in liquidation proceedings?
In compulsory liquidation proceedings, the company's directors must:
- provide information about the
company's affairs to the official receiver, probably initially over
the telephone, but later at a formal interview at the official
receiver's office;
- provide information about the
company's affairs to any insolvency practitioner who is appointed
liquidator of the company, and attend for interview when reasonably
required; and
- look after and hand over the company's
assets to the liquidator or official receiver, together with all its
books, records, bank statements, insurance policies and other papers
relating to its assets and debts.
When will liquidation end?
How long liquidation takes will depend on the circumstances of the
individual case (such as the nature of the assets involved and the
complexity of the liquidation), but once the process has been completed
the liquidator will ask to be released from office and file notice of
his release with the Registrar of Companies. Unless a request has been
made to defer the dissolution of the company the company is dissolved
after three months and will cease to exist.
Where can I get more information?
Our publications give more details of insolvency procedures. Please see
'A Guide for Directors' and 'A Guide for Creditors'.
You can obtain further copies of this booklet from The Insolvency
Service website: http://www.insolvency.gov.uk/.
All of our publications are also available on this website.
You may also, free of charge, order copies of our publications from the
BERR Publications Orderline. To do this you will need the reference
number (URN) of the forms required. This can be found on the back cover
of the leaflets or on the website. Orders can be made:
By telephone: 0845 015 0010 (calls to this number are charged at
national rate).
By email: publications@berr.gsi.gov.uk
By fax: 0845 015 0020
Minicom users should telephone: 0845 015 00308
You may also find it helpful to read the publication GBW1 'Liquidation
and Insolvency', issued by Companies House free of charge. It gives more
details about alternative insolvency proceedings and liquidation. The
quickest way to get a copy is through their website at: www.companieshouse.gov.uk
or by telephoning 0870 3333 636.
The address and telephone number of your local county court are listed
under 'Courts' in the phone book, where you should look for 'civil
courts - county courts' and not magistrates' courts. The Court Service
website at: http://www.hmcourts-service.gov.uk/
has an index of county courts that have jurisdiction to hear insolvency
cases.
You can also contact The Insolvency Service Insolvency Enquiry Line for
general enquiries, on 0845 602 9848, or email us at: Insolvency.Enquiryline@insolvency.gsi.gov.uk
For general enquiries to the Court Service, you can call their Customer
Service Unit on 0207 189 2000 or 0845 4568770, or email them at: customerservicecshq@hmcourts-service.gsi.gov.uk
The Service would like to thank the Institute of Credit Management
Technical Advisory Committee and the Fuji Film UK Insolvency Advisors
for their assistance in putting together this publication.
What additional help is available for court users with a disability?
If you have a disability that makes going to court or communicating
difficult, please contact the Customer Service Officer of the court
concerned, who may be able to help you. If they cannot help you, you can
contact the Court Service Disability Helpline free on 0800 358 3506
between 9am and 5pm, Monday to Friday. If you are deaf or hard of
hearing, you can use the Minicom service on 0191 478 1476.
Liquidation terms - what do they mean?
Creditor
Someone to whom the company owes money.
Debt
The money the company owes.
Dissolution
The process by which a company is removed from the Register held at
Companies House and therefore ceases to exist.
Execution
A creditor who has obtained judgment against the company and has not
been paid can apply to the court for 'execution', which gives the
sheriff or bailiff the power to seize the company's assets to pay the
debt.
Insolvency practitioner
An authorised person who specialises in insolvency, usually an
accountant or solicitor. They are authorised by the Secretary of State
or one of a number of recognised professional bodies.
Liabilities
The money the company owes.
Liquidator
May be either the official receiver or an insolvency practitioner. The
liquidator's main duties are to collect and sell the company's assets
and pay the creditors.
Realisation
Sale or disposal of assets.
Rescission of a winding-up order
A court order that cancels the winding-up order.
Winding-up order
A court order that places a company into liquidation.
Winding-up petition
A request to the court for a company to be placed into liquidation.
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