When a company owes you more than £750, and after a series of attempts to collect, the company still has not paid you, then you can present a winding up petition at court. Why more than £750? It is because the cost of filing this petition is more than £750 and it will not be reasonable to handle a case in court if the debt incurred is less than the cost to file the petition.
Requirements for the petition
First and fore most, the company must owe you more than £750. You need to have proof that the company owes you. Proof that the company failed to pay the debt after several attempts to collect. Then you fill up form 4.2 and a statement of the truth. You need to fill up 3 copies and submit them to the court. And make sure you have all the debtor company’s complete details.
Where to file the petition
You need to find a court that deals with insolvency. Naturally, you need to go to the nearest court where the company registered office. If the company has a paid up share capital of above 120,000 then you need to file the petition to the high court.
Serving the petition
Then you need to serve the petition to the company. You can do this by hiring a process serving firm, or mail it via post or to delivery it to the company’s office. Then once they have received it you need to send a certificate of personal service to the court where you filed the petition.
The Court Hearing
When the court accepts the petition a date for the hearing will be set. Then 7 days before the hearing, you have to place an ad in the London gazette to let the public know that a winding up petition has been served. You also need to give the court a copy of the London gazette ad and a certificate of compliance to the court. At the hearing date you need to give a list of everyone who will be attending the hearing. Once the hearing is successful, meaning the court has granted your winding up petition, then a liquidator will be appointed. The company will be closed down and the assets will be liquidated. The sales of the assets will be evenly distributed to the creditors.
This is the winding up petition procedure. This is the harshest method of debt collection. This is usually done as the last resort if all other means of collection has failed.
If you belong to the corporate world or in some way concerned with business then you may have already heard of this thing people refer to as a CVL or a Creditors’ Voluntary Liquidation. Such occurs in cases when the directors or members of an insolvent company initiate a meeting with the entity’s creditors and shareholders regarding the winding up of its affairs together with formal business closure. To put it simply, a CVL happens when the company itself chooses to liquidate because it cannot anymore pay its liabilities. Any remaining assets will be sold whose proceeds will be proportionally distributed to the creditors and the company is then dissolved.
Here it is important that the solvency or insolvency of the business entity is ascertained and a company may need to find a consultant, adviser or firm like Accura Accountants Business Recovery, who can provide consultation and assessment of the company’s financial position, assets, liabilities and accounting records. This is done to ensure that a Creditors’ Voluntary Liquidation (CVL) is indeed the appropriate action to be taken.
If insolvency has been proven such as the inability to pay off debts with current assets and a CVL is indeed appropriate, the BODs will then pass a resolution that it will cease to carry out its operations. The shareholders too can pass the same resolution by way of nomination. After which a meeting with the shareholders and creditors will be held an insolvency practitioner referred to as the liquidator will then be appointed and will carry out all the winding up affairs of the entity. With that said it is important to know what a liquidator does and needs to possess.
The LIQUIDATOR should first and foremost be a qualified insolvency practitioner and is chosen by the creditors at the meeting stated earlier. He or she is expected and required to take on his or her tasks in good faith and to exercise the powers delegated to him or her for the purposes with which they were given and do so with reasonable care. Their functions and power include the following:
- Assessment and collection of the insolvent entity’s assets, realization of their values and sale of the same.
- Distribution of asset sell-off proceeds to the entity’s creditors. If the amount is not enough it is to be distributed proportionately but if a surplus occurs it then is distributed to the members.
- Continuation of the business affairs only up to the point that is deemed beneficial for the impeding ending up or dissolution.
To make you understand better what a member’s voluntary liquidation is, we’ve asked experts from AABRS to explain things. It is the intentional winding up of a business by a solvent company meaning that its assets are still enough to pay off its liabilities. It is simply putting a close to a business officially and because insolvency is not the ground reason for such decision a statutory declaration of solvency is required from the BODs or Board of Directors. It also has to be approved and validated by shareholder votes.
This is unlike the creditors’ voluntary liquidation which is brought about by insolvency of the company and where the sale of its assets will be used to pay off its creditors. The thing they have in common though is the need to appoint a liquidator tasked to take care of the winding up process. The liquidator also takes care of seeing to it that the proceeds from the sale of assets are used to pay off the creditors and the liabilities first before distribution to owners and members are made.
Like most things this needs careful thought and consideration. A proposal has to be made and has to have the majority vote of shareholders. Furthermore, an assessment of the company’s financial position, assets, liabilities and other pertinent factors should be done to ascertain that the entity is indeed solvent. If proven that it is the opposite, a creditor’s voluntary liquidation will be done instead.
There are various reasons why corporate entities choose to have a member’s voluntary liquidation going. Below is a list of some of the said reasons:
- First is when the owners simply want to retire. It may seem unlikely and impossible at first but there are indeed owners who wish to live off from the product of their hard work and free themselves of all the stress attached with running a corporation.
- It can also happen when a significant member of an organization retires, dies or resigns. This is common in the technology industry as when a senior employee and the brain behind most of the business’ innovations, projects and ideas vacate his position.
- Also, when a subsidiary company turns dormant and its presence is deemed redundant and so has to be closed to preserve corporate assets and interest. Besides no one wants to keep a business that is no longer needed even if it is not generating any losses as of the moment.
- It is also fairly common in many family businesses where no one wants to succeed or run it.
- Another is when the business ceased to trade and its shareholders hope to obtain a tax efficient release of their capital ahead of retirement.