COMPULSORY LIQUIDATION: The term describes legal action taken against a company in court.
If a company is unable to pay its debts you can apply to the court to close the business (wind up the company).
But, to liquidate a company that owes you money:
- The company must owe you at least £750.
- You must be able to prove that the organisation cannot pay you.
There is a specific process to follow when you apply to wind up a company. You must use the correct forms and send them to the appropriate court.
This type of application to the court is better known as issuing a ‘winding-up petition‘. If the wind up petition is successful:
- Any assets that the company has will get sold off.
- If there are any outstanding legal disputes they will get settled.
- Any monies owed to the business gets collected.
- Leftover funds get paid to the claimant [you] and to any other creditors.
Note: The company owed you money before you took action to get it wound up. Thus, there is no guarantee that you will get all (or any) of the money owed to you.
There are other legal options if someone owes you money. You can also use a debt specialist. Their role is much like a solicitor and a specialist can often help you recover this type of debt.
Fees for Winding Up a Company that Owes You Money
The current fees to liquidate a company in court are:
- £302 court fees.
- £1,600 petition deposit (to manage the process of winding-up).
In some cases, you can claim back the court fees if the company has enough funds to repay them.
There are several different methods of payment accepted for the fees. You can pay by cash, building society, bank, solicitor’s cheque, or postal orders. Make any of these payable to ‘HM Courts and Tribunals Service’.
Note: Different rules and winding up petition fees apply to wind up a company in Scotland.
Applying to the Court
The court needs to receive the correct form before they can deal with a winding up petition. It may be better to find a legal adviser to ensure you submit the right petition.
Bankruptcy and Insolvency Forms
Download the form Comp 1 titled ‘Winding-up petition‘ from HMCTS form finder website. Fill in form Comp 1 and then make three (3) copies. You will then need to:
- Ensure the company details and information used to wind up the business are all correct.
- State if any European Community regulations apply to the company. It might apply to companies registered in (or doing business in) England and Wales.
- Ask the court to apply ‘company restoration‘ if it got dissolved. A court must restore a dissolved company before it can complete the winding up process.
The court needs evidence that the organisation owes you money (£750 or more). Thus, you will need to provide some proof using either:
- A county court judgment (CCJ): Remember to include the amount awarded. You may also need to add the court fees and interest where applicable. Include the date of the court judgment, the name of the court, and the case number.
- A statutory demand: Remember to include the amount and the date that the demand got served.
Fill in form Comp 2 titled ‘Verification of the petition‘ to complete the process. Form Comp 2 confirms the details of the petition.
Sending the Petition
The ‘paid-up share capital’ amount determines where you should send the petition. A winding up petition search on the Companies House register shows company paid-up share capitals.
Paid-up Share Capital £120,000 (or more)
You can submit the petition online if the company paid-up share capital is £120,000 or higher. Using HM Courts & Tribunals E-Filing Service means it gets sent to the High Court.
Paid-up Share Capital Less than £120,000
If the capital is under £120,000 you will need to search for your nearest court that deals with bankruptcy.
When you find it, you can submit the form petition online if it happens to be any of these:
- Admiralty and Commercial Court
- Chancery Division
- Companies Court
- High Court (includes Bankruptcy Court)
- London Mercantile Court
- Rolls Building
Note: The petition will need submitting by postal methods if it was not one of these courts.
After the Application
Following the application to the court you must then:
- Serve a copy of the petition. That means you must deliver a copy to a company director or to one of the employees.
- Provide a ‘certificate of service‘ to the court. This document confirms that the petition got served on the company.
Use a ‘process server‘ if you need help with this procedure. If you have a solicitor they can arrange this on your behalf.
What if you are unable to serve the winding up petition in person? In this case, you can deliver it by attaching it to the front door of the company or leave it at their office.
There may be a few extra tasks to complete the day after the petition gets served. Send a copy to the administrative receiver, relevant liquidator, administrator, or the supervisor if the company has involvement with:
- Administrative receivership or an administration order.
- A voluntary arrangement or voluntary liquidation.
If there is a Court Hearing
The court will set a date for a hearing if they accept your winding-up petition of the company that owes you money.
Announcing the Court Hearing
Once you have a date for the court hearing you must ‘formally’ announce it. That means announcing where and where the hearing will take place.
- You must make the announcement at least 7 working days before the hearing. This means placing an advert in The Gazette to state that the petition got served.
- Send a copy of the Gazette advert and form Comp 3 titled ‘Petition by office holder‘ to the court. You must do this at least 5 working days before the hearing takes place.
- Use form Comp 4 titled ‘Notice of persons intending to appear‘ before 4:30 pm on the day before the hearing. It provides a list of everyone who will attend the court.
The advert placed in The Gazette must state:
- That you presented a formal petition to wind up the company that owes you money.
- The date that you presented the petition.
- Your full name, address, and the name and address of your solicitor (where applicable).
- The name of the court where the hearing will take place.
- People need to ‘give notice‘ if they want to attend the hearing.
After the Court Hearing
The court starts issuing a winding up order after the hearing – if the petition is successful. After that, the court will then place an official receiver in charge of the liquidation process.
One role of the liquidator is to turn any company assets into money. The funds can get used to pay off debts owed by the business. Other creditors can also register as a creditor in a bankruptcy or liquidation.