Who can petition to wind up my company?

Find out which stakeholders can petition your company to try and close it down

A Winding Up Petition is a potent legal measure creditors can use to force your business into closure. Without valid grounds to contest it, the court may issue an order for Compulsory Liquidation, resulting in the shutdown of your business.

Although creditors are the primary source of Winding Up Petitions, other stakeholders may also seek to petition your company for closure.

 

Who holds the authority to issue a Winding Up Petition?

 

1. Company directors

Company directors can initiate a Winding Up Petition to voluntarily close their own company, typically when the business faces insurmountable debts. 

Instead of waiting for a creditor-issued Winding Up Petition, directors can proactively opt for a Creditors’ Voluntary Liquidation (CVL) to liquidate the business.

The advantage of a CVL over compulsory liquidation is that directors retain more control over the process, typically achieve better outcomes, and diminish their risk of personal liability for company debts.

Company directors can also file a Winding Up Petition against their own company in cases of conflict among directors or shareholders. Referred to as a ‘Just and Equitable’ Winding Up Petition, this may be invoked when directors face disagreements on company management or encounter disputes hindering normal business operations.

In such instances, the court will assess various factors to determine whether winding up the company is just and equitable. Additionally, it may explore alternative remedies, like facilitating one director’s acquisition of another’s shares to enable the business to continue trading.

 

2. Creditors

Should your business owe £750 or more to a persistent creditor unable to secure payment through alternative means, they may resort to issuing a Winding Up Petition. A successful petition results in the collection, sale, and distribution of the company’s assets among creditors, facilitating the recovery of some or all the owed money.

Trade suppliers, HMRC, and banks are among the creditors employing this procedure. HMRC, being the most frequent petitioner, issues approximately 60% of all Winding Up Petitions. This method serves as a swift means for debt recovery and preventing the accumulation of additional tax debts.

The petitioner incurs a substantial cost, including a court fee of £302, a refundable Insolvency Service deposit of £2,600, and potential legal expenses. Therefore, a Winding Up Petition is typically issued by a creditor with a significantly unpaid debt who has lost confidence in your capacity or willingness to settle the amount owed.

 

3. Shareholders

Shareholders can file a Winding Up Petition on just and equitable grounds if:

• The petitioner is an original shareholder of the company; or
• The petitioner is the sole shareholder of the company; or
• The petitioner has been a registered shareholder for a minimum of six out of the preceding 18 months.
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A shareholder dispute resulting in a Winding Up Petition may involve allegations of financial misconduct, breach of duty, or a disagreement regarding the company’s future direction and policies. Filing a Winding Up Petition serves as a mechanism to break the deadlock, allowing shareholders to progress and move forward.

The court must be convinced that it is just and equitable to wind up the company. It may hesitate to proceed with the winding-up if alternative options are available.

 

Read More:  

• What is wrongful trading in company insolvency
• Limited Company Fraudulent Trading Explained
• Are directors liable for limited company HMRC tax debts
• What are voidable transactions in an insolvency process
• What are the risks of trading while insolvent

 

Worried about the Winding Up Petition? What can you do?

The impact of a Winding Up Petition on a company director can be significant, but swift action provides the best opportunity to defend the company. If you face a Winding Up Petition threat from a creditor, shareholder, or fellow director, our assistance is available.

Connect with our insolvency experts for a confidential same-day consultation. With a network of 100 UK offices, we can promptly determine your optimal course of action.