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Who can petition to wind up my company?
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Find out which stakeholders can petition your company to try and close it down
A Winding Up Petition is the strongest legal action a creditor or creditors (someone you owe money to) can take against your business. If you do not have grounds to challenge the Winding Up Petition, an order could be by the court to close your business via a process called Compulsory Liquidation.
However, despite creditors being the most common party to issue a Winding Up Petition, it’s also possible that other stakeholders may want to petition your company to try and close it down.
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If your business owes £750 or more to a creditor that has been unable to get you to pay using other methods, it may decide to issue a Winding Up Petition as a last resort. If successful, the petition will lead to the assets of the company being collected, sold and distributed amongst the creditors so they can recover some or all of the money they are owed.
Trade suppliers, HMRC and banks are examples of creditors that use this procedure. HMRC is the most common petitioner, issuing around 60% of all Winding Up Petitions. It uses this method as a quick way of recovering debts and preventing further tax debts from being accrued.
The cost to the petitioner is high, with a court fee of £302, a refundable Insolvency Service deposit of £2,600 and also legal assistance to consider. For that reason, you’ll only usually be issued with a Winding Up Petition from a creditor with an unpaid debt of considerably more than £750 that has lost all faith in your ability or desire to pay.
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Company directors can also issue a Winding Up Petition to close their own company. They most commonly do this when the business has debts it cannot repay. Rather than waiting to be issued with a Winding Up Petition by a creditor, the directors can decide to liquidate the business themselves via a Creditors’ Voluntary Liquidation (CVL).
The benefit of a CVL over compulsory liquidation is that the directors have more control over the process, generally receive better outcomes and reduce their risk of personal liability for company debts.
However, company directors can also issue a Winding Up Petition against their company when there’s a conflict between the directors or shareholders. Known as a ‘Just and Equitable’ Winding Up Petition, this may be used if the directors cannot agree on the management of the company or where there’s some other dispute that’s preventing the business from operating normally.
In this case, the court will consider all the factors and decide whether to wind up the company on just and equitable grounds. It may also seek other remedies where possible, such as one director purchasing the shares of another so the business can continue trading.
Shareholders of the business can also issue a Winding Up Petition on just and equitable grounds, as long as:
- The petitioning shareholder is the only shareholder of the company; or
- The petitioning shareholder is an original shareholder of the company; or
- The petitioning shareholder has been a registered shareholder of the company for at least six of the previous 18 months.
A shareholder dispute leading to a Winding Up Petition cloud involve allegations of financial wrongdoing, breach of duty or a disagreement about the company’s future path and policies. Issuing a Winding Up Petition acts as a way to resolve the deadlock so the shareholders can move forward.
The court will have to be satisfied that it is just and equitable for the company to be wound up, and again, it may be reluctant to wind up the business if there are other options.
The ramifications of a Winding Up Petition can be far-reaching for a company director, but acting quickly gives you the best possible chance to defend your company. If you have been threatened with a Winding Up Petition by a creditor, shareholder or a fellow company director, we can help.
Contact one of our insolvency experts for a same-day consultation in complete confidence. We operate from a network of 100 UK offices around the country, and can quickly identify your best course of action.
Further Reading on Who can petition to wind up my company?
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