Winding Up Petitions
A winding up petition (WUP) is court-instituted process that seeks to "wind up" the affairs of a business that cannot pay its creditors. In most cases, this happens to a business that cannot pay debts of more than £750. Some of the people who can file a petition to wind up a company include its directors, any creditor, the Secretary of the State, an administrator, or a clerk of the magistrates' court.
The purpose of a seeking to wind up an insolvent company is to ensure all its affairs are in order. This includes stopping all its operations, collecting money from its debtors, selling any disposable assets, settling legal disputes, terminating all existing contracts, and settling its debts. Take note that a WUP does not mean that all creditors will get their money.
How The Process Works
To file a winding up petition, one must prove that the company in question owes him or her more than £750. In addition, one must prove that the company cannot pay up the amount of money that it owes. One way of proving these claims is by getting a form for a statutory demand from your local court and serving it to the business that owes you money. If the business does not pay you within 21 days, you can proceed to file a winding up petition.
You can issue a claim for judgment against a company if an earlier execution does not result in the seizure of assets that can clear all your debts. Another option is proving that the value of a company's debts is more than its assets. Since this process involves legal issues, it is wise to hire a solicitor to help you present such a petition in court. Your advocate will help you complete form 4.2 and a statement of truth, issue the petition, serve the petition, as well as withdraw the petition if necessary. Your solicitor will also come in handy during court hearings.
Hearings vary depending on where you file for a winding up order. Nevertheless, hearings always take place on the date indicated on the petition. It is not necessary for the individual or business entity that filed a petition to appear in court. They can instruct their solicitors to represent them. At this stage, one can request the court registrar to make a winding up order. Creditors can also request the registrar to dismiss the petition if the company that owes them money settles its debts.
If the registrar issues a winding up order, the official receiver will begin the process of liquidating the company involved in this case. This includes investigating its affairs to establish the reason it failed, advertising the winding up order in the London Gazette, meeting with creditors to appoint an insolvency practitioner, as well as collecting and selling company assets in order to pay creditors.
The threat of a wind up order can prompt a company to pay its debts as quickly as possible and seek business debt advice. This is especially true for businesses that want to protect their reputation. Secondly, the entire process is fast and can force a business to wind up its operations within six weeks. Thirdly, this process is quite affordable compared to issuing a claim.
To start with, this process can be messy if any of the parties involved dispute evidence presented in court. The debtor may mount a successful defense leading to the dismissal of the petition. Secondly, it may be impossible to reverse the legal process seeking to wind up a company even if the outstanding debt is paid. For instance, support for your petition from another creditor will lead to the closure of a company even if it pays your debt. Thirdly, the liquidator enforcing administration orders will distribute money realized from sale of company assets in proportion to the value of one's debts.
A WUP may be necessary in the event a company is unable to meet its financial obligations, particularly to its creditors. One can institute such a process for as little as £750. The pros of a WUP include ability to jolt a debtor to pay off outstanding debts, inexpensive, and it is a relatively quick procedure. Conversely, its drawbacks include potential disputes leading to lengthy court hearings and distribution of proceeds from sale of a company's assets in order of priority.