What is a winding up petition? - Definition - Sections 122 & 124 of The Insolvency Act 1986
Issue of Petition - The Hearing - and The Winding Up Order
What is a winding up application or winding up petition?
Section 124 of The Insolvency Act 1986 addresses the topic of "Application for winding up". Section 124 says that for a Company to be wound up then:
- An Application must be made to Court on a form known as a winding up petition.
- While it is more often that a creditor issues a winding up petition it is also possible for the directors and shareholders of their own company to issue a winding up petition against their business.
Section 122 of The Insolvency Act 1986 meanwhile addresses the connected topic of "Circumstances in which a company may be wound up". While that Section is long the main circumstance that more often permits a winding up petition to be issued against a company is that it is "unable to pay its debts".
A company is said to be placed in "compulsory liquidation" when a court makes an order that the company should be wound up (a winding up order).
The Winding Up Petition
A company cannot be wound up by the court unless a winding up petition is first presented to the court by an interested party and then served on the debtor company.
If you have a winding up petition served against your company there are still ways to protect your business. Contact Chris Parkman on 01326 340579 to learn all the options.
The usual 'interested party' who applies to the court for the issue of a winding up petition is an unsatisfied judgment creditor of that company. (eg a trade creditor, loan creditor, H M Customs and Excise or the Inland Revenue). That creditor is deadly serious by the time they issue the petition as it will have cost them approximately £2,000 in Court fees and solicitor's costs to issue that winding up petition.
The Issue of the Winding up Petition
The Court receives the Application for a winding up petition and the appropriate Court fee from the company to whom your organisation owes the money at issue. The Court then stamps the winding up petition with a date of issue. That 'issue date' of the winding up petition is most important for reasons which will become apparent in the case studies that are on this website. The winding up petition also records the date on which it will be heard. The winding up petition is then served on the company concerned and the winding up petition is also advertised in the London Gazette. It is this gazetting that can bring the existence of the winding up petition to the attention of the company bankers and others.
The Hearing of the Winding up Petition
Approximately one to one and a half months after the issue of the winding up petition the Court will "hear" the petition. What this means is that the court will listen to representations made by the applicant creditor and defence arguments put forward by the company subject to the petition.
At this winding up hearing the winding up petition is "heard" and very often a winding up order is made and the company is placed into compulsory liquidation. As indicated earlier the definition of what is a "winding up petition" is found in Sections 122 & 124 of The Insolvency Act 1986.
To avoid a winding up order being made against your company please contact Chris Parkman for FREE advice on 01326 340579.