What is a winding up petition?
A winding up petition is a legal action taken by company directors, creditors or contributories against a company that owes them money.
A company is deemed unable to pay its debts in Scotland if:
- It owes more than £750 to a creditor and a written demand has been served requiring payment to be made within 21 days but the company has failed to do so.
- The time limit given on a charge for payment on an extract decree has expired without payment being made.
- It is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due or if the value of the company’s assets is proven to be less than the amount of its liabilities.
What is a winding up order?
A winding up order is an instruction from the Court that a company be wound up and the Court nominates and appoints a qualified insolvency practitioner to act as Liquidator.
The Liquidators role is to realise the assets of the company for the benefit of the general body of creditors.
The court process
Winding up petitions are generally presented to the local sheriff court in which the company’s registered office is located, however if share capital is greater than £120,000 it is necessary to present the petition to the Court of Session in Edinburgh.
Once the court has considered the petition and is satisfied that the company is unable to pay its debts as they fall due, first orders for service and advertisement will be issued. The petition is then served on the company and advertised in The Edinburgh Gazette.
Once the petition has been served, the company (or any other interested party) has a period of eight days to lodge answers. If no answers are lodged, the petitioner will return the papers to the court and ask for the winding up order to be made and for an ‘interim liquidator’ to be appointed. The matter will not call in court.
An insolvency practitioner, who will have previously provided their consent to act, will be appointed as interim liquidator. The interim liquidator’s appointment is effective on the granting of the court order and directors will no longer be in control of the company.
The Interim Liquidator must within 28 days of the winding up order seek nominations from the creditors and contributories for the purpose of choosing a Liquidator. He must also deliver a report on the winding up and the state of the company’s affairs to the creditors before the decision date.
If no nominations are received from the company’s creditors and contributories the Interim Liquidator must make a report to the Court requesting the appointment of the Interim Liquidator as Liquidator.
If one or more nominations are received the Interim Liquidator must seek a decision on proposals for nomination of a Liquidator from the creditors by a relevant decision procedure.
The Liquidator, once appointed is responsible for winding up the affairs of the company, safeguarding and realising the assets of the company for the benefit of the creditors, as well as considering and reporting on the conduct of the directors to the Insolvency Service.
The Liquidator has extensive powers, include power to sell the company’s assets, to bring and defend legal proceedings and to pay dividends to the company’s creditors. Some of the liquidator’s powers can only be exercised with the agreement of the liquidation committee or the Court.
When all assets are realised and distributed in the prescribed order of priority, exit from liquidation is completed by dissolution and strike off
In very limited circumstances, a provisional liquidator may be appointed when a winding up petition is presented to the Court, depending on the nature of the company’s business.
A provisional liquidator has specific powers granted by the court, such as the ability to trade, buy, and sell on behalf of the company. The role of a provisional liquidator is to protect and preserve the company’s business and assets while the court decides if a winding up order is appropriate.
For a provisional liquidator to be appointed, the court must be convinced that it will benefit the general body of creditors.
How Can McLenan Corporate Help Me?
When petitioning the Court for a Liquidation, McLenan Corporate will provide the petitioner with appropriate advice, we will ensure that all relevant paperwork and decision procedures are completed efficiently allowing the liquidation to proceed quickly.
Our liquidation costs are very competitive, and we will ensure you have direct access to our licensed Insolvency Practitioner to answer all your questions.
All initial advice and guidance is provided free of charge. As an insolvency boutique firm, we do not provide the services you do so you can rest assured we will not entice your clients.
McLenan Corporate is a trading name of McLenan Corporate Solutions Limited, Marathon House, Olympic Business Park, Drybridge Rd, Dundonald, Kilmarnock, Ayrshire KA2 9AE. Company Number SC651445.
Margo McLenan is licensed to act as Insolvency Practitioner in the UK by the Insolvency Practitioner Association.
Insolvency Practitioners are bound by the Code of Ethics when carrying out all professional work relating to an insolvency appointment.