Winding-up petitions: top tips

Although winding up is designed to be a remedy for creditors, resulting in an even distribution of assets, initially it can give you (the petitioning creditor) the upper hand. If the debtor company wishes to avoid the damage caused by advertising a petition and the risk of winding-up, it must settle with you.

The first step is to simply send a letter demanding payment of an undisputed debt within three working days and, if no response is received or payment is not made, you can use that as the basis for the presentation of the petition and proof that the company cannot pay its debts. You do not need to wait 21 days or bother with service of a statutory demand in the case of a corporate debtor.

The costs of issuing a petition are;

1. An issue fee of £905. This amount includes the court fee to issue the petition of £190, plus the Official Receiver’s deposit of £715. If you withdraw the petition, you will get the deposit of £715 back.

2. If you attend the court in person rather than post your documents and fee, you will also have to pay a search fee of £12 in Companies Court in London.

3. The process server’s fee for serving the petition. This is usually about £100 plus VAT.

Generally the courts dislike the use of winding-up petitions as a high pressure debt collecting method and are of the view that if the debtor genuinely disputes the debt the creditor should sue and obtain judgement first.

You need to consider any defence raised by the debtor and whether it is likely to prove to be genuine before deciding whether to present or advertise a petition. Typical considerations include:

Is this the first time the defence has been raised?

Were the invoices never challenged at the time?

Were any complaints or counterclaims raised before now?

Is the defence good at law and credible?

Has any documentation actually been provided to support the defence?

The courts do not like the idea of a trial taking place in the winding-up process but they will decide whether or not to accept a defence or allow the petition to proceed. The presentation of a petition can result in your debt being paid ahead to prevent advertisement and a winding-up order. Seek legal advice and act quickly to be ahead of the game.

Sarah McLennan is an associate in the London finance and restructuring practice at international law firm, Faegre & Benson LLP. She can be contacted at smclennan@faegre.com or on +44(0)20 7450 4533.

Picture source

Related articles:Cash flow: what you need to knowCarlesberg: Probably not the best-paying brewer in the world

Share this story

Close
Menu
Send this to a friend