What is a Winding up Petition? - Insolvency Advice Centre

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Winding up petition

Suppliers and investors will often try to recover their debt by issuing a claim, but it’s possible to issue a winding up petition against a company or bankruptcy petition against an individual. Bankruptcy and winding up may also be used to force a judgement once a claim has been won, as a means of recovering debt.

Debt Repayment – Order of Priority

Debts are required to be repaid in a specific order of priority.

  • Secured Creditors.
  • Floating Charge Holders.
  • Preferential Debtors. This includes unpaid wages owed to employees.
  • Unsecured Creditors. This includes HM Revenue & Customs (HMRC).
  • Outstanding Debt Interest.
  • Shareholders.

The Winding Up Process

Winding up is a process that applies to a company rather than an individual.
Once the winding up process is complete, the company in question will no longer exist.
Creditors will not be paid in full if the company being wound up is deemed to be insolvent.
According to rules pertaining to winding up, creditors will receive a percentage of what they are owed if the company being wound up is insolvent.

If a Customer Still Refuses to Pay

The mere threat of issuing a winding up petition or bankruptcy petition are usually enough for recovering a customer’s debt. If the customer still refuses to pay, you may wish to:

  • Issue a Statutory Demand. A creditor can issue a statutory demand from a solicitor or legal stationer. It can also be downloaded and issued without the use of a solicitor.
  • Delivery of the Demand. The demand must be delivered to the customer through a special delivery or registered mail service. Registered companies should be contacted at their registered office address.
  • Response Time. The customer must respond within a fixed number of days.
  • Failure to Respond. If the customer fails to respond, you can issue a winding up petition against a company or bankruptcy petition against a customer.
  • Follow Procedures Correctly. If the necessary procedures have been followed correctly, the court may be in your favour and the winding up or bankruptcy procedure will be conducted.
  • You Will Not Be Prioritised. If the court does find in your favour, you won’t be given preferential treatment with the debt recovery. Debts will be repaid to creditors in a fair and structures way.

Before taking the decision to conduct extreme measures such as issuing winding up or bankruptcy petitions, it’s highly advisable to seek legal advice first.


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