What is a Winding Up Petition?
A winding-up petition is a formal request submitted to the court by a creditor seeking to liquidate a company that owes them money and is unable to pay. This legal action can lead to the compulsory liquidation of the company, where its assets are sold to repay creditors.
The process is governed by the Insolvency Act 1986, particularly Section 122(1)(f), which states: “A company may be wound up by the court if the company is unable to pay its debts.”
For expert legal advice on issuing or defending a winding-up petition, contact our expert winding- up petition solicitors for a Free Consultation at 0207 459 4037 today or complete our enquiry form for a call back.
Requirements for a Winding-Up Petition
- The debt owed by the company must be £750 or more.
- The debt must be due and payable, and the company must have failed to pay it.
- The creditor must have made a formal demand for payment, and the company must have failed to comply with the demand.
- The debt must not be disputed.
Example of Winding-Up Petition
A small construction company that is struggling financially due to a series of delayed payments totalling £150,000 from a major client. Despite numerous attempts to collect the outstanding debt, the client refuses to pay, leaving the construction company in a difficult situation. The construction company decides to file a winding up petition to force it into compulsory liquidation and recover the debt owed. This legal action puts the debtor company at risk of losing its assets and facing closure if the debt is not settled promptly or if the company fails to take the necessary steps to stop the winding up petition.
Breakdown of Winding Up Petition Costs
The costs associated with a winding-up petition in the UK can vary significantly depending on the complexity of the case and the fees charged by solicitors and courts. Here is a detailed breakdown of the potential costs:
1. Court Fees and Petition Deposit:
- Petition Fee: The fee to present a winding-up petition is currently £302.
- Petition Deposit: An additional deposit of £2,600 is required to cover the costs of the Official Receiver.
2. Solicitors’ Fees:
Solicitors’ fees for preparing and presenting a winding-up petition can range from £525 to £2,500, depending on the complexity of the case and the solicitor’s hourly rate. This includes: considering the papers and advising, drafting the petition, serving the petition on the company, and representing the creditor in court.
3. Advertisement Costs
The petition must be advertised in the London Gazette, which incurs an additional cost of approximately £100 to £200.
4. Process Server Fees
The cost for serving the petition to the company can range from £100 to £200, depending on the location and the urgency of the service.
5. Liquidator’s Fees
If the court orders the winding-up of the company, a liquidator will be appointed. The liquidator’s fees are typically paid from the company’s assets and can vary widely based on the complexity of the liquidation process.
Need assistance with the costs and process of issuing a winding-up petition? Contact Go Legal for a free consultation at 0207 459 4037 or via our online booking form.
Grounds for Presenting a Winding Up Petition
The primary grounds for presenting a winding-up petition are defined under the Insolvency Act 1986. Under Section 123(1), a company is deemed unable to pay its debts if it fails to comply with a statutory demand for payment within 21 days or if an execution or other process issued on a judgment, decree, or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part.
Additional Grounds for Winding Up a Company
Apart from the inability to pay debts, other grounds under the Insolvency Act 1986, Section 122(1), include:
- Insolvency Act 1986, Section 122(1)(a): “The company has by special resolution resolved that the company be wound up by the court.”
- Insolvency Act 1986, Section 122(1)(b): “The company does not commence its business within a year from its incorporation or suspends its business for a whole year.”
- Insolvency Act 1986, Section 122(1)(c): “The number of members is reduced below two (in the case of a company that is not a private company limited by shares or by guarantee).“
- Insolvency Act 1986, Section 122(1)(d): “The company is unable to pay its debts.“
- Insolvency Act 1986, Section 122(1)(e): “The court is of the opinion that it is just and equitable that the company should be wound up.”
Who Can Petition to Wind Up a Company?
Creditors
Creditors are the most common petitioners in winding-up petitions. They can petition the court if they are owed more than £750 and the debt is undisputed. The inability of the company to pay its debts is often demonstrated by the failure to comply with a statutory demand or an unsatisfied court judgment.
Shareholders
Shareholders can also petition to wind up a company, especially in cases where it is just and equitable to do so. Common grounds for shareholder petitions include deadlock situations where the shareholders are unable to make decisions, fraud, or misconduct by the directors.
The Company Itself
A company can petition for its own winding up through a special resolution passed by its members. This usually happens when the directors conclude that the company is insolvent and that it is in the best interests of creditors to wind up the company.
Other Parties
Other parties that can petition to wind up a company include:
- Administrators: Appointed under the Insolvency Act 1986, Schedule B1, Paragraph 79, who may convert an administration into a winding up.
- The Official Receiver: Acting as the provisional liquidator can petition if they believe it is necessary to protect the company’s assets.
- Regulatory Bodies: Certain regulatory bodies may petition to wind up companies under specific legislation if it is in the public interest, such as companies involved in illegal activities.
If you would like to know the step by step process of issuing a winding up petition, our expert insolvency lawyers have written two articles “How to Stop a Winding- Up Petition” and “Where to issue a Winding-Up Petition” which provides more information.
For detailed advice on who can petition to wind up a company and the relevant procedures, contact our expert lawyers for a Free Consultation at 0207 459 4037 or via our online booking form.
Winding Up Petition Case Examples
Understanding the relevant case law is crucial for navigating the winding-up petition process:
| Case | Key Takeaway | Details |
| Re Bayoil SA [1999] 1 WLR 147 | Winding-up petitions should not be used for disputed debts. | This case established that a winding-up petition should not be used as a means of debt collection where the debt is genuinely disputed. In Re Bayoil, the petitioner had issued a winding-up petition to pressure the debtor into settling a disputed debt. The court held that using a winding-up petition in this manner was an abuse of process. “The court should dismiss a winding-up petition based on a debt which is bona fide disputed on substantial grounds.“ |
| Moorview Developments Ltd v First Active plc [2010] EWHC 1804 (Ch) | Importance of procedural compliance in winding-up petitions. | This case highlighted the necessity of adhering strictly to procedural requirements when issuing a winding-up petition. The petition in Moorview Developments was dismissed because the petitioner failed to serve the petition correctly, demonstrating the critical importance of following proper procedures. “Non-compliance with procedural requirements can result in the dismissal of the petition.“ |
| BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28 | Interpretation of “balance sheet insolvency”. | This case provided clarity on the interpretation of balance sheet insolvency under Section 123(2) of the Insolvency Act 1986. The Supreme Court held that a court must take a realistic and commercial approach when assessing whether a company is balance sheet insolvent. “The court must determine whether, on the balance of probabilities, the company has insufficient assets to meet its liabilities.“ |
| Re Capital Anarchists Ltd [2022] EWHC 50 (Ch) | Misuse of winding-up petitions as a debt collection tool. | The court emphasised that winding-up petitions should not be misused as a method of applying pressure to settle disputes over debts. In Re Capital Anarchists, the petitioner had used the threat of a winding-up petition to force payment on a disputed debt. The court ruled this as an abuse of process. “A winding-up petition should not be used as a means of enforcing payment of a disputed debt.“ |
| Re Demaglass Holdings Ltd [2001] 2 BCLC 633 | Requirement for evidence of insolvency. | This case underscored the importance of providing sufficient evidence to prove that a company is insolvent. In Re Demaglass Holdings, the court dismissed the petition due to lack of evidence showing the company’s inability to pay its debts. “Clear evidence of the company’s insolvency is necessary for a winding-up petition to succeed.“ |
| Re A Company (No. 0012209 of 1991) [1992] BCLC 865 | Genuine and substantial disputes over debt. | This case clarified that if there is a genuine and substantial dispute over the debt, the petition should be dismissed. Re A Company involved a dispute over the amount owed, and the court dismissed the petition, stating that such disputes should be resolved through ordinary litigation. “A genuine and substantial dispute over the debt should lead to the dismissal of the petition.“ |
| Re Sykes & Sons Ltd [2012] EWHC 105 (Ch) | Exceptional circumstances for adjournment. | This case highlighted that if the company presents a belated but legitimate dispute, the court may adjourn the issue of costs to await the outcome of proceedings in which the dispute can be properly addressed. “The court may adjourn a winding-up petition in exceptional circumstances where there is a legitimate dispute.“ |
For detailed advice on the winding up petitions and the costs, contact our expert insolvency lawyers at Go Legal for a free consultation on 0207 459 4037 or via our online booking form below.
Winding Petition Costs FAQs
What is the cost of issuing a winding-up petition?
The cost of issuing a winding-up petition typically includes court fees, solicitors’ fees, advertisement costs, and process server fees. The total cost can range from £4,500 to £7,000 depending on the complexity of the case.
How much does a winding-up petition cost in total?
In total, the cost can vary widely but is generally between £4,500 and £7,000. This includes all associated fees such as court fees, solicitors’ fees, advertisement costs, and process server fees.
Can I recover the costs of a winding-up petition?
If the court grants the winding-up order, the costs of the petition are usually recoverable from the assets of the company being wound up. However, if the company has insufficient assets, the creditor may not recover all of their costs.
What happens after a winding-up petition is issued?
Once a winding-up petition is issued, it is served on the debtor company and advertised in the London Gazette. The court will then hold a hearing to decide whether to grant the winding-up order. If granted, a liquidator is appointed to wind up the company’s affairs.
What are the risks of issuing a winding-up petition?
If the petition is unsuccessful, the creditor may not only lose the fees paid but could also be ordered to pay the debtor’s legal costs. Additionally, if the debt is genuinely disputed, issuing a winding-up petition could be seen as an abuse of process.
Can a winding-up petition be withdrawn?
Yes, a winding-up petition can be withdrawn before the court hearing if the debt is paid or if the parties reach a settlement. However, the creditor may still incur some costs that are not recoverable.
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Expert Winding Up Petition Solicitors in London
If you are struggling to pay your debts or wish to pursue a debtor, it is important to seek professional advice as soon as possible. Our expert insolvency and winding-up petition lawyers can help you.
Please call us at 0207 459 4037 for a Free Consultation. Let our expert winding up petition solicitors assist you in safeguarding the future of your business and navigating the complexities of winding up petitions.
