What Is A Winding Up Petition By HMRC or Other Creditor
Learn what a winding-up petition is, when it's used, and the legal process involved. Read our comprehensive guide written by licensed insolvency practitioners
Read
Can I Liquidate My Company Myself?
The answer is no, you cannot liquidate your own company, because you need to be a licensed insolvency practitioner to liquidate a company! So, how do you quickly get your company liquidated? If the company IS insolvent then the company directors need to decide if the business is viable. If it is not, it should be quickly liquidated.Here are the 5 steps you need to go through:Step 1 Find a Liquidator. We can help as we have a number of insolvency practitioners across the UK. Uniquely to KSA, you can speak to one of our IPs TODAY. Call on 08009700539.Step 2 - Pass details of any company assets over to the proposed liquidator, and our valuers may get these valued. This will independently set the value of the assets for going to auction, or you may wish to buy them. Step 3 Let us know who the company owes money to (creditors). KSA will write to them all to let them know whats happening and tell them that a creditors meeting will be held. The meeting can now be held online or phone as physical meetings are no longer mandatory. This will quickly remove creditor pressure from you and they will start talking to KSA instead!Step 4 Give us all company information and books and records. KSA will give you a list of all the information we need in order to liquidate your company. This information will allow us to prepare the necessary reports for the creditors. Step 5 A company director needs to "chair the meeting of creditors". In actual fact the liquidator will run the meeting but you or one of your directors must attend it by law.Call KSA now and we will get you talking to an insolvency practitioner today! If the company is solvent but you just want to get the money out then you can do an Members Voluntary Liquidation (MVL).
Read
Winding Up Petition in Scotland
We are a Scottish registered company and a creditor has threatened a winding up petition. Is the procedure in Scotland different to that in England? Yes. If a creditor issues a winding up petition your options are even more limited than in England. The reason is to do with the advertisement of the petition. To summarise, in England after the Winding Up Petition has been served, advertising cannot take place for seven days. (Please note that for the Petition to proceed it must be advertised no less than 7 days after service and at least 7 days before the Hearing). It is the advertising that can be the end of the company. Banks have a continual watching brief on the Gazette, where it is advertised. Once advertised they will almost certainly freeze the company's bank account, often the end of the company.The reason behind the freezing is logical. If the WUP is ultimately granted, any dispositions which took place after the service of the Petition can be claimed by a liquidator as void, or voidable. This is because the legislation allows the Liquidator to claim back any monies paid out which he or she determines were not in the interest of creditors as a whole. In that event, the bank will be required to repay any such dispositions (payments). The freezing of the account itself is not a legislative requirement as such, it is merely a mechanism used by the banks to protect their position against possible claims by the Liquidator. In Scotland however: The Winding Up Petition (minimum debt in Scotland £10,000) dates from the presentation of the Petition at the court offices; when it is lodged. At this point a First Order is given. This First Order is the authority to serve and advertise. At the same time, it is ‘Walled’. This is the damaging part! Walling literally means the the Notice is pinned to the Court notice board for all to see...including the company’s bank! What do the bank do on spotting the walled petition? Freeze the bank account...immediately!Whilst the respondent has 8 days to lodge defences, there is NO delay period for advertising- the Petition is advertised at the same time as service and, more damagingly, it is Walled immediately. So in this case, if the bank has spotted this (and they will...remember they hold a watching brief on all wallings) and frozen the bank account, how would a director or board of directors manage to pay staff, pay suppliers for on-going stock, or pay lawyers and advisors to help prepare an answer to the petition and a CVA proposal? Sadly the answer is often, they cannot and the company is fatally damaged by this knock out blow and not even make it to the lodgement of answers resulting in an Interim Liquidator being appointed by the Court, leading to Liquidation.One unfortunate side effect of this loss of grace period is that a petition may be issued maliciously and so damage the company. We advise clients in Scotland to lodge a caveat in both their local Sheriff court and the Court of Session. The effect of the caveat is that the court is required to notify the party who has lodged the caveat of the intention to proceed with the Winding Up. Then a Hearing will be fixed. If it is in a busy Sheriff court then the hope is that the Hearing might be a few weeks off. In a less busy court the opposite is the case. The important point is that some notice is given which will allow directors the opportunity to prepare answers and a proposal to put to creditors for the repayment of debt over time while the bank account is operational. This is obviously vital for the company to continue to trade during this time. A WUP can be the death knell for any company, especially so in Scotland so it is vital to lodge caveats, as a matter of course, and act quickly if you sense a petition may be about to be served. Often there is a solution – the trick is to apply it before a Petition is lodged.So if you feel under threat then DO NOT DELAY and talk to Eirlys Lloyd our expert advisor on these matters on 0131 242 0081 or 08009700539
Read
How To Issue A Winding Up Petition Against a Debtor Company
How do I issue a winding up petition. A guide to procedure and costs of issuing a petition on a company to recover debts. When to use it and when not to.
Read
What Are The Consequences Of A Winding Up Petition?
A winding up petition is when a creditor, who is owed more than £750, puts forward a legal notice to ask for the court to liquidate the company as they believe the company is insolvent.
Read
Compulsory Liquidation & What It Means For Companies
Compulsory liquidation is a court led process where a judge orders that a company be liquidated as it cannot pay its debts and is insolvent.
ReadWinding Up Petititions In Scotland
We are a Scottish registered company, and a creditor has threatened a winding up petition. Is the procedure in Scotland different to that in England? Yes. If a creditor issues a winding up petition your options are even more limited than in England. The reason is to do with the advertisement of the petition. When can a creditor wind up a Scottish company?A creditor is owed £750 and has failed to pay even after having recieved a statutory demand giving 21 days to pay. The court is satisfied that the company is unable to pay its debts as they fall due, or that the value of the company’s liabilities (including contingent liabilities) exceeds the value of its assetsIf the company has less than £120,000 of share capital the petition is presented at the local Sheriff Court. Winding up petitions against companies with paid up share capital in excess of £120,000 are presented at the Court of Session in Edinburgh.To summarise, in England after the Winding Up Petition has been served, advertising cannot take place for seven days. (Please note that for the Petition to proceed it must be advertised no less than 7 days after service and at least 7 days before the Hearing). It is the advertising that can be the end of the company. Banks have a continual watching brief on the Gazette, where it is advertised. Once advertised they will almost certainly freeze the company's bank account, often the end of the company.The reason behind the freezing is logical. If the WUP is ultimately granted, any dispositions which took place after the service of the Petition can be claimed by a liquidator as void, or voidable. This is because the legislation allows the Liquidator to claim back any monies paid out which he or she determines were not in the interest of creditors as a whole. In that event, the bank will be required to repay any such dispositions (payments).The freezing of the account itself is not a legislative requirement as such, it is merely a mechanism used by the banks to protect their position against possible claims by the Liquidator.In Scotland however:The Winding Up Petition dates from the presentation of the Petition at the court offices; when it is lodged. At this point a First Order is given. This First Order is the authority to serve and advertise. At the same time, it is ‘Walled’. This is the damaging part! Walling literally means the the Notice is pinned to the Court notice board for all to see...including the company’s bank! What do the bank do on spotting the walled petition? Freeze the bank account...immediately!Whilst the respondent has 8 days to lodge defences, there is NO delay period for advertising- the Petition is advertised at the same time as service and, more damagingly, it is Walled immediately. So in this case, if the bank has spotted this (and they will...remember they hold a watching brief on all wallings) and frozen the bank account, how would a director or board of directors manage to pay staff, pay suppliers for on-going stock, or pay lawyers and advisors to help prepare an answer to the petition and a CVA proposal? Sadly the answer is often, they cannot and the company is fatally damaged by this knock out blow and not even make it to the lodgement of answers resulting in an Interim Liquidator being appointed by the Court, leading to Liquidation.One unfortunate side effect of this loss of grace period is that a petition may be issued maliciously and so damage the company. We advise clients in Scotland to lodge a caveat in both their local Sheriff court and the Court of Session.The effect of the caveat is that the court is required to notify the party who has lodged the caveat of the intention to proceed with the Winding Up. Then a Hearing will be fixed. If it is in a busy Sheriff court then the hope is that the Hearing might be a few weeks off. In a less busy court the opposite is the case. The important point is that some notice is given which will allow directors the opportunity to prepare answers and a proposal to put to creditors for the repayment of debt over time while the bank account is operational. This is obviously vital for the company to continue to trade during this time.A WUP can be the death knell for any company, especially so in Scotland so it is vital to lodge caveats, as a matter of course, and act quickly if you sense a petition may be about to be served. Often there is a solution – the trick is to apply it before a Petition is lodged.So if you feel under threat then DO NOT DELAY and talk to Eirlys Lloyd our expert advisor on these matters on 0131 242 0081 or 08009700539
Read
Honest Burgers Served a Winding Up Petition By HMRC Before Settlement
According to reports in the Times, the Honest Burger chain of restaurants was served a winding up petition by HMRC over an unpaid tax bill. The company stated that it had been asking for a bit more time to pay the debt but talks had fallen through. HMRC often allow companies a bit of extra time to pay taxes and this is usually called a Time to Pay arrangement.Honest Burger spokesperson said that they had been told that they would have at least 6 weeks before any action was taken by HMRC. They were somewhat surprised to find that HMRC filed a petition only a week later. The issue now facing companies is that when a petition is filed at the court it is instantly available to various credit reference agencies. This used not to be the case until after a petition was actually advertised which, to be fair, was usually a few weeks after it would have been served.This goes to show that HMRC are beginning to take more aggressive action against companies that they feel can afford to pay. Honest Burgers had just raised £3m via crowdfund capital raise last month and perhaps HMRC felt that they needed to get paid.The reports did not reveal what the amounts were but a spokesman for Honest Burgers said.“If we could deliver burgers half as quickly as HMRC delivers petitions, our like-for-like sales growth would be even higher than the 20 per cent we are seeing now.”A spokesman for HMRC said: “We take a supportive approach to dealing with customers who have tax debts and only file winding-up petitions once we’ve exhausted all other options, in order to protect taxpayers’ money.”This is all a bit embarrasing for the company that has grown significantly since its start in Brixton in 2011. The company now employs 700 people across its 40 sites. The company says it has now paid the outstanding tax and the petition has been withdrawn.Byron Burgers was another chain that has experienced financial problems and entered a CVA to try and cut costs. The chain had gone from 67 to just 9 now. So perhaps HMRC were wary of Burger chains.HMRC will take into account companies that it feels are at greater risk of insolvency when prioritising the collection of taxes.
Read
What is a Winding Up Order?
A winding up order is an order by the court that a company or partnership should be “wound up” and liquidated. This is usually known as compulsory liquidation.
Read
What is a Validation Order?
A validation order is where a company can apply to 'unfreeze' the company's bank account. This is a court order that essentially "validates" transactions going through the account and prevents a liquidator from holding the bank liable for money being withdrawn, whilst there is a winding up petition.
Read
What is the effect of a winding up petition on a football club?
Firstly...what does 'being served a winding up petition' mean? If a company or football club has been served a winding up petition then it usually means that all previous attempts at settling the debt have been unsuccessful. As such the creditor uses the "nuclear option" whereby they say that the club has to be wound up as it simply cannot pay its debts. An application, or petition, is made to the High Court (this is the winding up petition) to ask the court to wind the company up. Southend United were the latest to feel this action. And the process? An application is made to the high court to ask the court to wind the company up.20-75 days after the petition has been sent to the company and a hearing is arranged in the High Court or Court of Session in Scotland, for the Court to consider whether it should put the company into compulsory liquidation or not.Note, the winding up petition has to be advertised more than 7 days before the hearing. This puts the process in the public eye and gives a very public indication that the club has not paid some of its debts. As expected, this makes everyone worry about the future of the club. Will the players be paid? Will the club continue to play? Will it be deducted points?For most businesses once a winding up petition has been advertised the business is in effect paralysed as the bank will freeze the account in order to avoid any "disposition of assets". Football clubs are not run purely for profit but also for pleasure by their (usually) wealthy owners. As such, the freezing of the bank account of the club does not usually mean that the club has to shut immediately. Money is often forthcoming from other sources connected to the owners. Of course, it is also not unusual for the monies outstanding to be paid personally by the owners to avoid administration. The personal circumstances of the owners are often complex and there are other companies that are involved in the actual running of the club. As such the effect of a winding up petition does not necessarily mean the end of the football club.But the petition pressure and director being worried about wrongful trading can lead to a situation whereby insolvency proceedings are taken by the directors. This usually involves placing the company into administration. The company must then enter a CVA to exit administration usually with a new owner or funder so it can regain its licence to play in the Football League, Premier League or the Scottish equivalents. The club will be deducted at least 10 points.If the CVA is rejected, as happened before in the case of Leeds United when the administrator sells to a new buyer, then a further points deduction is made - often 15 points. This led to two relegations for Leeds.Interestingly the CVA must pay the football creditors (players and leagues) 100p in £1 BEFORE any creditors like HMRC! Otherwise the CVA is not valid and further points can be deducted or the licence to play in the relevant league withdrawn the ultimate sanction. Given that HMRC are now preferential there is unlikely to be any payments for other creditors. HMRCs Involvement In the football world it is usually HMRC who serve the petitions as it is the main creditor (as of December 2020 anyway!).What is more, with the level of players wages, the total PAYE liability of the club is usually very high. Any delay in the payments of these amounts over the HMRC does give the club a cashflow boost. Updates At the most recent Owners’ and Executives’ Conference and AGM, a number of new rules were decided regarding the insolvency process and football clubs. The League’s Insolvency Policy has been changed to include the following:Football clubs are no longer required to enter a company voluntary arrangement (CVA) 12 points deduction for a club going into administration (up from 10 points) Continuing to support the Football Creditors Rule whereby football debt is paid before any other creditor (like HMRC). Administrators must have 21 days at least to market a football club that’s in administration, and meet the club’s supporters’ trust to allow them to put forward a bid. Buyers of football clubs (in administration) must pay back creditors a minimum of 35p in the pound over three years (or 25p if transferred by shares). If this isn’t followed, there will be a 15 point deduction the next season. If an individual buys a club with 10% shareholding or more, he/she must inform the Football League.The League wants to focus on strengthening their insolvency policy to make it fair to employees, supporters and creditors.A possible downside to the 21 days rule could be the club is on the market for a considerable amount of time. This could cause the business to lose value over time if suppliers and customers lose faith.
ReadWhat Is The Difference Between Voluntary Liquidation and Compulsory Liquidation?
It’s important to understand what the difference is between compulsory and voluntary liquidation. Both are insolvency proceedings but have very different implications for you, as a director, and for your company. What Is Liquidation? Liquidation is a formal insolvency process when a liquidator ‘winds up’ a company’s affairs. It sells all of the insolvent businesses’ assets and the proceeds go to as many creditors as possible. The proceeds are distributed in order of priority.By the end of the liquidation process, the company is completely dissolved and struck off the Companies House register. The Insolvency Service will also investigate the conduct of the company's directors. They will be looking for signs of wrongful or fraudulent trading.There are two main types of liquidation; compulsory and voluntary. As their names suggest, the main difference relates to how the proceedings come about. Compulsory Liquidation Compulsory liquidation is forced on a company by its creditors. This is usually after the approval of a winding up petition in Court.After approval, the Official Receiver will take over the company's affairs. They will freeze bank accounts and begin the investigation into what led to the company’s insolvency.A liquidator will be appointed if there are assets to recover. The proceeds from this will cover the cost of the liquidation. Any remaining funds will go to the creditors, however it is unlikely that they’ll receive anything like the full amount owed. It is the Official Receivers statutory duty to carry out an investigation into the directors conduct. Voluntary Liquidation Also known as a Creditors Voluntary Liquidation (CVL), a voluntary liquidation starts when the directors, and owners, decide to close their business as they cannot pay their creditors. The company has to be insolvent for this to happen. See this page to find out if your business is insolvent.The directors then ask us as licensed insolvency practitioners to seek a decision from the creditors and the shareholders as soon as possible (within 14-21 days) to put the company into liquidation with the liquidator appointed by the creditors. In most cases we will ask for "deemed consent" whereby a date is fixed, no earlier than 7 days into the future, and if no objections by creditors have been received then the company will be deemed to have been put into liquidation. The vast majority of liquidations (95%) are done this way now. However, in larger and more complex cases it is more likely that a creditors meeting is held.Neither the Court or Official Receiver are part of voluntary liquidation. The process is quicker than a compulsory liquidation. Which type of liquidation is best for you and your company? So, the main difference between compulsory and voluntary liquidation is whether or not the process was the director's idea. In both situations, the company is insolvent with no prospect of turnaround.The compulsory liquidation process is not ideal for any business. Disadvantages of Compulsory LiquidationWaiting for creditors to wind up the company suggests that directors were unaware, or ignoring, their company’s financial state. If the Official Receiver finds this to be the case, the director could be held personally liable for debts accrued since they knew the company was insolvent. What is more the whole process takes a long time. Being wound up by the court will appear on Companies House records.So, the option of a voluntary liquidation may be your best option as it has several benefits; Advantages of Voluntary LiquidationThe directors are seen to be acting proactively in the creditors’ best interests. This is very important when it comes to the conduct investigation later on. Also, the process is much quicker which means that employees can receive compensation from the redundancy payments office in good time. It also ensures that the directors remain in control of the process, and the company closes down in an orderly manner. This helps if the directors wish to create a phoenix company, or start over in the same industry. In a voluntary liquidation the directors can receive pre-insolvency advice about the likely impact of the liquidation on them personally and take appropriate action.How can you avoid being liquidated compulsorily?Paying the debt Defending the petition at court Entering a Company Voluntary Arrangement (CVA) Choosing a CVL before the hearing ( this can only be done with permission of the petitioner i.e. they must withdraw the petition )If you are concerned about liquidation or your company’s finances, please get in touch with our insolvency experts today. They’ll provide advice tailored to your company’s situation, and suggest several options you can take.
Read